Loan Rejection. Who’s Fault?

How many times have we heard of loan rejections on the rise? Well this has been happening even before the cooling measures started. Perhaps it got worse after the stern warning from BNM to all commercial banks. Actually who’s fault is it? Is it the Bank Negara Malaysia’s fault for forcing the banks to be super stringent in their loan approval evaluations? Let’s be very real. The only entity that should always be very wary of what is really happening must be BNM. I would be very worried if BNM did nothing until today when all the other countries have been trying their best to cool the property market.
Is it the banks who are to be blamed for being very careful and not simply lend? If we look at the non-performing-loan ratio of Malaysian banks, hey we are one of the best in the world. Seriously, do you want them to simply lend like those days during the 1998 crisis where some banks were so overstretched that they had to be ‘rescued’ by stronger banks or they may pull down everyone else?
Perhaps it is because the buyers’ themselves who are trying to overstretch themselves to buy the biggest and most expensive one that they can afford for the fear of losing ‘face’ if they bought a smaller and inferior unit? If you said no to this, I have to ask you to rethink. How many of your friends actually tell you that paying for mortgage is easy because it’s one or two levels below what they can actually afford?
Or is the reason simply due to affordability? Prices becoming way too high that no one could afford them and thus their loans are rejected? Personally, amongst my friends, many of them have bought homes, some more than one and thus far I think they are able to get loans. There was even a few who have worked just 5 years but already own more than one property. Of course, to be honest, majority has yet to buy one which is key reason why property investment is a serious long term investment. When not many buys, we BUY. When everyone has a home and everyone is buying their second home for investment, WE should try other investments.
I think the answer is clear. One word, affordability. Buyers must buy responsibly and objectively. Sorry, you do not buy the most expensive property that you can because by doing so, you either get your loan rejected or you have just pushed the prices even higher because you contributed to the demand. Buy based on what we truly need and not based on what we feel we want. Thus think affordability. Developers have no choice but to plan along the lines of affordability. Anything above RM600,000 is indeed a very high number and is going to be a good measurement for few more years to come while waiting for incomes to also rise. It does not matter what we believe. it matters only what we actually do. Happy buying or waiting.
written on 14 Feb 2015
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