Developers’ Home Financing Scheme May Be Capped At 6%
The Ministry of Urban Wellbeing, Housing and Local Government suggested that the maximum interest rate of 6% per annum for the home financing scheme from developers is a fair offer.
Tan Sri Noh Omar, Minister of the Urban Wellbeing, Housing and Local Government, believes that the developers with money lending licences are not seeking profit from the interest.
The developers’ main concern is to sell off their properties using the financing scheme to help buyers bridge the remaining 20% or 30% of financing gap that was not provided by the bank, said Noh.
“Generally, the bank will not give 100% loan to house buyers. Usually it is 70% or 80%. Where do the house buyers get the remaining 20% or 30%? They borrow from their relatives, families, friends, or make personal loans.
“Therefore, the Act allows developers to give out personal loans to cover this balance,” Noh explained,” he elaborated.
Although stated in the Moneylenders Act that the money lender can charge a maximum of 18% interest rate for home buyers without collateral, or 12% for home buyers with collateral, the minister has the power to decide what is the acceptable interest rate as well as the loan repayment period.
Earlier this month, the ministry was instructed by the cabinet to review and improve the current policy that exist under the Moneylenders Act. Therefore, they are currently studying it thoroughly and looking at its effectiveness by seeking feedback from all quarters, including developers and Bank Negara Malaysia.