The housing loan application rejection rate has declined to below average, according to the Bank Negara’s (BNM) Financial Stability and Payment Systems Report 2017.
The report, which outlines the risks and challenges faced by the country financially, revealed the rejection rate was at 23.1% last year, which is equivalent to a quarter of all cases and below the 26.1% average recorded from 2012 until 2016.
The improvement of the rates was attributed to the positive alignment between bank lending standards and borrowing behavior according to the Policy Document on Responsible Financing.
Lower margins of finance were also given towards higher priced units, while its collateral value were closely monitored.
Despite the soft property market, banks have been approving home financing requests made by first-time homebuyers as they made up 71% of total housing loan provided by the banks.
Nevertheless, banks continue to exercise caution towards funding property purchases in less favourable locations or those of financially weak developers.
Among the reasons that led to the rejection of housings were lack of income to support the debt repayment, credit history and insufficient financial documentation.
Meanwhile, speculative activities in the residential market continue to be subdued, while the amount of borrowers with at least three outstanding housing loans grew by 0.9% last year, compared to 1.2% in 2016 and 15.8% in 2010 – this translated to about 3% of total housing loan borrowers.
However, the amount of housing loans paid off within the last three years reduced to 9.7% last year compared to 11.8% in 2016.