National House Buyers Association Honorary Secretary-General Chang Kim Loong said the effective rate for a fixed rate loan of six per cent for 10 years is 10.21 per cent.
“This is more than double the effective interest rate of housing loans, which is around 4.6-5 per cent.”
Chang was commenting on Urban Wellbeing, Housing and Local Government Minister Noh Omar’s statement yesterday that the government may cap the loans issued by housing developers at six per cent.
He told FMT the combined repayment of the mortgage and the developer’s loan would be much higher than if the borrower managed to secure a 90 per cent margin of financing from banks.
This, Chang said, placed a lot of financial stress on the borrower, which could lead to an increased likelihood of the borrower defaulting either on his mortgage or the developer’s loan.
He said if this happened, the house buyer will face foreclosure proceedings on the property, writ of seizures of chattels and movable property, bankruptcy, or both.
He also said it was important to remember that when banks issued loans, they would use the property as collateral, while money lenders will make borrowers sign an unsecured loan agreement with a “Letter of Guarantee” by a third party.
Chang questioned why the minister and those under his charge were so concerned over developers’ ability to sell their properties to resort to such an ill-conceived measures like these developer-issued loans.
“It will create hardship to the buyers instead of purportedly helping them.
“Why allow buyers to continue to slave for the banks and money lenders?”
Yesterday, Noh said the ministry was still getting feedback on an acceptable loan interest rate, but believed developers should impose an interest rate of only up to six per cent.
He said under the Moneylenders Act, moneylenders could charge a maximum of 18 per cent interest rate without collateral or 12 per cent with collateral.
However, the interest rate for these developer-issued housing loans would be decided by him as minister.