Ringgit loans for British properties

PETALING JAYA: Malayan Banking Bhd (Maybank) expects its Overseas Mortgage Loan Scheme, the bank's first ringgit-denominated mortgage facility for property purchase in Britain, to boost its home financing division.

With the new product, the division is expected to grow more than 13% in its current financial year ending June 30, 2011.

The mortgage was designed for high net worth customers interested in buying properties in Britain due to the favourable currency exchange rate, said Maybank community financial services deputy president and head Lim Hong Tat in a statement yesterday.

London offered attractive advantages for property purchase to non-residents, he said, adding that the bank had worked with international real estate agencies to assist customers on British regulations.

The ringgit mortgage facility will finance completed or residential and commercial properties under-construction in London covering prime locations such as the city of London, Westminster, Knightsbridge, Kensington and Chelsea.

Key features of the loan scheme include repayment in ringgit, high margin of financing of up to 85%, flexible repayment and long tenure of up to 30 years or 70 years of age whichever is earlier.

“This milestone mortgage scheme brings tremendous savings to customers as the unique proposition of this loan is Malaysians being able to borrow in ringgit for the purchase of property in London.

“Borrowing in ringgit will protect customers from currency fluctuations on their monthly loan repayments and savings as the pound sterling is anticipated to rise against the ringgit this year,” said Lim.

A banking analyst said the facility provided investors with protection against currency fluctuations.

Asked if other banks would offer similar facilities, the analyst said: “The banking industry is constantly coming up with ways to boost their margins and remain competitive.”

According to Maybank, Malaysians purchasing properties in London have to obtain financing from Britain-based banks and pay the monthly installments in pound, thus exposing them to exchange fluctuations.

Financing from Britain-based banks for Malaysians is only available for “buy-to-let purposes” the property must be purchased for investment purposes and not for own occupation.

Lim said the facility was offered in the form of term loan, overdraft or a combination of term loan and overdraft.

“We anticipate a take-up of RM60mil within the next six months. This is in view of the attractive property valuation in London and overseas buying interest which will be before April when the new 5% sales tax is imposed for properties above 1mil.

“The current strong ringgit against the pound is also another factor that will encourage Malaysians to buy before the anticipated rise in the second half of the year,” he said.

Lim said the people can enquire about this new facility at any Maybank branch in Malaysia or in London.

By The Star

Maybank launches ringgit-based mortgage facility for UK property

KUALA LUMPUR: MALAYAN BANKING BHD expects a take-up of RM60 million within the next six months for the ringgit mortgage facility offered to Malaysians who want to purchase property in London.

The bank’s “Overseas Mortgage Loan Scheme”, launched on Thursday, Jan 13, will finance completed or residential and commercial properties under construction in London Zone 1 to Zone 3 in prime locations such as City of London, Westminster, Knightsbridge, Kensington and Chelsea.

“Key features of Overseas Mortgage Loan Scheme include repayment in ringgit, high margin of financing up to 85%, flexible repayment and long tenure of up to 30 years or 70 years of age whichever is earlier,” it said.

Maybank’s deputy president and head of community financial services, Lim Hong Tat said Malaysians would be able to borrow in ringgit for purchase of property in London with the loan taken in Malaysia.

“Borrowing in ringgit will protect customers from currency fluctuations on their monthly loan repayments and savings as the sterling pound is anticipated to rise this year from its current low exchange rate with the ringgit,” he said.

At present, Malaysians purchasing properties in London have to obtain financing from UK based banks and pay the monthly installments in sterling pound and they are exposed to foreign currency exchange fluctuations.

Lim said financing from UK based banks for Malaysian citizens currently was only available for “buy-to-let purposes”, namely, the property must be purchased for investment purposed and not for own occupation.

As for Maybank’s ringgit-based mortgage facility, he said it would be offered in the form of term loan, overdraft or a combination of term loan and overdraft.

“We anticipate a take up of RM60 million for this new facility within the next six months. This is in view of attractive property valuation in London and overseas buying interest to peak before April 2011 when the new 5% sales tax is imposed for properties above £1 million.

“The current strong ringgit against the sterling pound is also another factor that will encourage Malaysians to buy before the anticipated rise at the second half of the year,” Lim said.

Lim said the new mortgage was designed for high net worth customers who were showing increasing interest in buying properties in that part of Europe, due to the favourable currency exchange rate, attractive property price as well as for those who have children studying in the London area.

“London currently offers attractive advantages for property purchase to non residents and the Bank has tied-up with reputable international real estate agencies to assist customers on UK regulations,” Lim said.

By The EDGE Malaysia

Property and other loans growth poised to slow down

PETALING JAYA: Loans growth is poised to slow down as lending indicators are showing signs of moderation in credit expansion, said analysts.

ECM Libra Investment Research expects household loans growth to slow down as property sales cool down amid credit tightening and policy measures to curb excessive speculative activities.

In a report issued yesterday, ECM Libra said the loans growth momentum could be curbed by slow deposit growth which has continued to lag credit expansion at 6.5% year-to-date or 7% on an annualised basis.

Despite slower growth rates, leading loans indicators remain at comfortable levels considering that absolute levels of loan applications and approvals stayed close to peak levels. Its calendarised loans growth forecasts is 8.4% for this year and 10.9% for last year, according to AmResearch Sdn Bhd's report yesterday.

AmResearch added that net interest margins might see less pressure with the average lending rate stabilising.

OSK Research Sdn Bhd said in a report yesterday that this year's loans growth would remain robust as the rise in interest rates from record lows was unlikely to dampen pent-up credit demand spurred by a recovering economy.

AmResearch said the slowdown in the residential loans segment was positive, considering that household debts had risen significantly over the past one year.

“The future (loans) growth will likely be driven partly by execution of projects under the government's Economic Transformation Programme (ETP),” it added.

While the ETP implementation will be predominantly financed by the private sector and result in higher business loans growth, ECM Libra said it was cautious on the prospect of project implementation delay at this juncture.

The banking industry saw an overall loans growth of 13.2% year-on-year (y-o-y) in November 2010 due to business and household sector loans expansion as compared with the 12.4% y-o-y loans growth seen in October 2010.

“This growth has surpassed the previous high of 12.9% y-o-y growth almost two years earlier in December 2008. The peak before this would be the 14.9% growth in April 1998. Thus, industry loans growth is now at the highest level since the Asian financial crisis,” said AmResearch.

However, slower growth was seen in leading indicators. Loans applications, approvals and disbursements all expanded slower on a y-o-y basis for November 2010 at 13.2%, 4.7% and 0.7% against October's 20.8%, 21.4% and 11.8% respectively.

Despite the slower loans growth, AmResearch said the absolute amount of loans applied of RM56bil was still close to peak levels compared with the monthly average of RM43.4bil for 2009.

It added that the muted increase in loans approved in November 2010 was not a major concern, as it came mainly from a 74.5% y-o-y drop in other purpose segment (which included lumpy loans approved to the public sector).

OSK Research said that loans applications dipped as applications for the business and household sectors trended lower. It added that weaker demand for construction and purchases of fixed assets other than land and buildings led to slower business applications.

“Loans applications for the household sector declined, mainly due to slowing growth in the purchase of residential property,” said OSK Research.

Loans approval growth slowed due to weaker growth in the business sector with loans approvals for the purchase of fixed assets other than land and buildings being the major drag while loans approvals for the household sector moderated, it added.

Meanwhile, ECM Libra said competition in the mortgage market had resulted in widening negative spread over the base lending rate (BLR).

“This is likely the cause for the fall in average lending rate (ALR) to 4.99% despite average BLR remaining unchanged at 6.27%. Interest margin is under pressure as the ALR-3 month fixed deposit spread has fallen to 2.25%, the lowest level in 12 years,” it added.

However, momentum in merger and acquisition activities is expected to be sustained, which would underpin non-interest income growth. CIMB Group Holdings Bhd would be the main beneficiary, said ECM Libra.

By The Star

New rule to cool property speculation

Bank Negara Malaysia has put in place a rule that allows banks to lend only up to 70 per cent of the house value.

The new mortgage lending rule, which applies only to borrowers taking up a third housing loan, is meant to curb excessive investment and speculative activity in urban areas.

"While Malaysia is not experiencing a general property price bubble, targeted pre-emptive measures are appropriate to moderate the increases in property prices that are evident in select locations, arising from purchases that are speculative in nature.

"This measure is expected to moderate excessive investment and speculative activity in the residential property market and to ensure affordability of homes for genuine house buyers," Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said in her keynote address at the Financial Industry Conference in Kuala Lumpur yesterday.

She gave the assurance that financing facilities for the purchase of first and second homes would not be affected and that borrowers would still be able to obtain financing for these at the current loan-to-value ratio (LVR) applied by individual banks, based on their internal credit policies.

The new rule takes effect immediately. Banks were previously not subjected to any curbs on mortgage lending.

The Association of Banks in Malaysia (ABM), whose members comprise the country's 23 commercial banks, supported Bank Negara's move, saying that it was "timely and pre-emptive".

"While the banking sector is wholly in support of house ownership, we agree that appropriate measures should be adopted to avert unhealthy speculative activities which could lead to a property bubble," its chairman Datuk Seri Abdul Wahid Omar said in a statement yesterday.

Abdul Wahid, who is also the chief executive officer of top lender Malayan Banking Bhd (Maybank), said the move was not expected to dampen or have an adverse impact on the growth of residential property development, nor on the banks' house financing business.

The ABM and its member banks had engaged with Bank Negara on the matter prior to the latter coming out with the ruling.

A banking analyst from a foreign brokerage noted that most banks, particularly the bigger ones, already adopt strict LVR on borrowers taking up a second, and especially third, housing loan, with location also being an important factor.

As such, the analyst agreed with Abdul Wahid that the new rule was not likely to have a big impact on the banks' mortgage business.

"On a third loan, it's already quite hard to get an 80 per cent LVR now," she remarked. For a first loan, banks usually lend up to 90 per cent of the house value, or even up to 100 per cent in some cases.

The country's biggest mortgage players by market share are Public Bank Bhd, CIMB Bank Bhd and Maybank.

Property developer Mah Sing Group Bhd also does not see the new rule hurting overall sentiment of the market significantly as it comprises mainly first-time buyers and upgraders.

Neither does its group managing director Tan Sri Leong Hoy Kum see a property bubble building up as the price increases have been largely those of properties with good concepts by well-known developers and in good locations.

Zeti, in her speech, noted that residential property prices in the country had increased steadily in tandem with economic development and rising household income.

"In the more recent period, however, certain specific locations, particularly in the urban centres, have experienced faster growth, both in house prices and the number of transactions. Supporting this trend has been the increase in financing for multiple-unit purchases by a single borrower. This suggests investment activity that is of a speculative nature," she said.

Property prices in Malaysia rose 5.6 per cent in the first quarter of this year and 4.2 per cent in the second quarter, according to Bank Negara.

By Business Times

New mortgage rule 'positive' move: Citi

Malaysia’s move to tighten mortgage rules is “positive” for the nation’s banks as it will help prevent a property bubble and limit the risk of household non-performing loans, Citigroup Inc analyst Fiona Leong said in a report yesterday.

The central bank yesterday placed a limit on the loan-to-value ratio for people taking out third mortgages to buy homes in a bid to moderate “excessive” investment and speculation in urban areas.

Banks with bigger exposure to home mortgages are Hong Leong Bank Bhd and Alliance Financial Group Bhd, Leong said.

By Bloomberg

Support for Bank Negara’s housing LVR cap move

PETALING JAYA: Bank Negara’s imposition of a maximum loan-to-value ratio (LVR) of 70% for a third and subsequent housing financing facility taken by a borrower is seen as a timely pre-emptive measure to avert unhealthy speculative activities and a potential property bubble, industry players concurred.

With the latest measure that takes immediate effect, people buying their third and subsequent house would be required to pay a higher down-payment than the current standard minimum of 10% of the value of a house.

In a statement yesterday, the central bank said financing facilities for purchase of first and second homes would not be affected and borrowers would continue to be able to obtain financing for these purchases at the present prevailing LVR level applied by individual banks based on their internal credit policies.

Real Estate and Housing Developers Association president Datuk Michael Yam said the association supported the measure as it would ensure a healthier and orderly housing market.

“There are some hot spots in the housing market where prices have appreciated higher than the average price increases in other locations. As financing for the first and second housing properties will not be affected by the ruling, the move is not expected to dampen the performance and growth of the housing property sector.

“Meanwhile. the LVR cap on those buying their third and subsequent house should stem speculative buying and ensure a more sustainable housing market,” Yam added.

Mah Sing Group Bhd group managing director cum group chief executive Tan Sri Leong Hoy Kum said the move was not surprising as Bank Negara had given earlier indications of such a move.

“The move should not significantly affect the overall sentiments of the market which comprises mainly first-time buyers and upgraders.”

Leong said there was no property bubble as price increases were only for properties with good concepts in good locations.

“As long as developers offer quality properties with good concepts in prime locations, there should still be takers due to our strong employment market, low interest environment and good liquidity in our financial system,” he added.

National House Buyers Association honorary secretary-general Chang Kim Loong said the measure would help curb speculative buying in the local housing market.

“Prices of landed residential properties have increased substantially over the last five years.

“We are glad that the Government has heeded HBA’s call with regards to the LVR. We will next seek to make housing more affordable for middle-income households and have pricing control for this group of buyers.

“HBA has urged the Government to set up a Special Task Force with such an objective and aspiration,” he said.

RAM Ratings head of financial institution ratings Promod Dass said: “Given this LTV measure only applies to the third home loan onwards, there should still be ample opportunities for banks to focus on first-time home buyers and perhaps to finance the purchase of a second home for lifestyle upgrading purposes.”

“All said, the level of prevailing interest rates would be an important factor too for the health of home loans, given that the bulk of outstanding home loans are based on floating interest rates,” he said in an e-mail interview.

The Association of Banks in Malaysia (ABM) chairman Datuk Seri Abdul Wahid Omar said while the banking sector supported house ownership, ABM agreed that appropriate measures should be adopted to avert unhealthy speculative activities which could lead to a property bubble.

Abdul Wahid, who is also Malayan Banking Bhd president and CEO, said: “In my view, the application of the measure is clear and specific and the LTV ratio itself, optimal.

Given that financing for first and second housing properties will not be affected by the ruling, the move is not expected to dampen or have an adverse impact on the growth of residential property development sector as well as the banks’ house financing business.

“Affordability of homes for genuine buyers will be preserved as banks continue to lend prudently under their respective risk management framework.”

On the Financial Capability Programme, he said it underscored the view shared by ABM that education was paramount in the promotion of sound financial and debt management.

Details of the implementation of the programme would be announced next month.

By The Star

BNM: Maximum loan-to-value (LTV) ratio of 70% for 3rd home loan

KUALA LUMPUR: Bank Negara Malaysia is imposing with immediate effect the maximum loan-to-value (LTV) ratio of 70% for the third house financing facility taken by a borrower as it seeks to curb "excessive investment and speculative activity in the residential property market".

The central bank said on Wednesday, Nov 3 the move was expected to moderate the excessive investment and speculative activity in the residential property market which has resulted in higher than average price increases in such locations.

“This has also led to increases in house prices in surrounding locations, thus contributing to the declining overall affordability of homes for genuine house buyers," it said.

Bank Negara said the financing facilities for purchase of the first and second homes are not affected and borrowers will continue to be able to obtain financing for these purchases at the present prevailing LTV level applied by individual banks based on their internal credit policies.

“The measure aims to support a stable and sustainable property market, and promote the continued affordability of homes for the general public,” it said.

Below is the entire statement issued by Bank Negara:

Measures in Promoting a Stable and Sustainable Property Market and Sound Financial and Debt Management of Households

Bank Negara Malaysia wishes to announce with immediate effect the implementation of a maximum loan-to-value (LTV) ratio of 70%, which will be applicable to the third house financing facility taken out by a borrower. Financing facilities for purchase of the first and second homes are not affected and borrowers will continue to be able to obtain financing for these purchases at the present prevailing LTV level applied by individual banks based on their internal credit policies. The measure aims to support a stable and sustainable property market, and promote the continued affordability of homes for the general public.

At the national level, residential property prices have increased steadily in tandem with economic development and the rise in income levels. This aggregate growth trend remains largely manageable and has not deviated from the long term trend in residential property prices. In the more recent period, however, specific locations, particularly in and around urban centres, have experienced faster growth, both in the number of transactions and in house prices. This is further supported by an increase in financing provided for multiple unit purchases by a single borrower, suggesting increasing investment activity that is of a speculative nature.

The targeted implementation of the LTV ratio is expected to moderate the excessive investment and speculative activity in the residential property market which has resulted in higher than average price increases in such locations. This has also led to increases in house prices in surrounding locations, thus contributing to the declining overall affordability of homes for genuine house buyers. This measure therefore remains supportive of the objective of encouraging home ownership among Malaysians which continues to be an important national agenda.

Introduction of the Financial Capability Programme

As part of the continuous efforts to raise the level of financial literacy and to promote sound financial and debt management by Malaysians, Bank Negara Malaysia also wishes to announce the introduction of the Financial Capability Programme. This Programme will be offered by Agensi Kaunseling dan Pengurusan Kredit (AKPK) through its establishments nationwide and will commence from January 2011. The Programme is aimed at equipping individuals with important knowledge for responsible financial decisions by gaining practical understanding and skills in money and debt management. This in turn will contribute towards preserving the sound financial positions of households and ensure that debt accumulation is commensurate with household affordability, including their ability to absorb interest rate adjustments and potential volatility to income and expense levels. Individuals particularly new prospective borrowers and young adults are strongly encouraged to participate in this specially designed programme. The details of the implementation of the Financial Capability Programme will be announced later in December this year.

Bank Negara Malaysia

3 November 2010

By The EDGE Malaysia (by Joseph Chin)

Mortgage cap decision soon

Bank Negara Malaysia may make it harder for Malaysians to buy more than two houses as it seeks to stem speculative buying that is pushing up property prices.

Sources said the central bank would be meeting with banks next week to discuss plans for a mortgage cap whereby loans would be limited to a portion of the property value.

"The expectation is a cap of about 70-80 per cent. We think a directive will be issued to cap," said two sources with knowledge of the meeting.

Earlier, Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz said it was prepared to take pre-emptive action and that it has wide-ranging instruments to prevent a property bubble.

"We want to promote house ownership, but we want it to be done in an orderly manner and we don't want speculative activities," she told reporters on the sidelines of the Global Islamic Finance Forum in Kuala Lumpur yesterday.

She acknowledged that there may be pockets of bubbles forming in parts of Malaysia, but believes Malaysian banks are dealing with this through their own risk management process.

Areas like the Klang Valley and Penang have reported strong property demand.

In June this year, some 147 double-storey terrace houses just outside of Kuala Lumpur priced from RM1.75 million each were sold out in just five hours.

Rising property prices have been fuelled by low borrowing costs, the continuing promotions by developers and expectations of a recovering economy.

More money is also flowing into Asia from developed economies where interest rates are low as investors seek higher returns elsewhere.

But this is not unique to Malaysia. Regulators in China, Hong Kong and Singapore have imposed measures to cool their property markets.

Zeti also said that "massive" financial literacy programmes would be rolled out as a pre-emptive measure.

These would be aimed at those aged below 30 to help them better manage their finances at the start of their careers.

By Business Times