KUALA LUMPUR: At the end of June 2021, 12.8% of household loan accounts, or 16% of outstanding household loans, were subject to a repayment assistance plan, with borrowers earning less than 5%. 000 RM per month, representing two thirds of these. loan accounts.
That figure was higher than 8.9% of household accounts, or 11.1% of outstanding household loans, as of December 2020, Bank Negara Malaysia (BNM) said.
“While access to repayment assistance helps temporarily support borrowers ‘debt servicing capacity, a more entrenched economic recovery remains essential to restore borrowers’ long-term financial health,” he said. stated in its financial stability report for the first half of 2021 published. here today.
The central bank noted that some early positive signs of this development had been observed, with the total share of household accounts receiving repayment assistance starting to decline between February (11.5%) and May (10.6%). ), just before the order for total movement control. (OCAF) was imposed.
The report also indicates that at the end of July 2021, the share of household loan accounts and repayment assistance exposures also increased sharply to reach 25.4% and 30% of total household accounts and loan exposures, respectively.
On other developments, he said borrowers who opted for the latest assistance programs were spread across all income groups. This, together with the more flexible aid eligibility criteria, suggests that the recent increase in repayment aid accounts is not solely due to distressed borrowers.
BNM surveys and anecdotal evidence indicate that around a third of borrowers who have applied for repayment assistance use it in part to provide precautionary buffers and, to a lesser extent, to invest in the equity market. .
Banks’ exposures to household investors also increased slightly from pre-pandemic levels to 13.7% of all banking system loans (December 2020: 13.6%; December 2019: 13.3 %).
However, the annual growth rate of banks ‘exposures to homeowners’ mortgage loans continued to exceed that of household investor exposures (8.4% and 5.2%, respectively; December 2020: 8.7% and 5%). So far, investor households have been mostly high-income people who are generally more resilient to income shocks.
The average loan-to-value ratio (LTV) of mortgage loans outstanding from investor households also remained relatively low and stable (54.8%; December 2020: 54.9%), thus preserving ample room for maneuver against a potential decline. of housing prices, he mentioned.
Those earning less than RM 5,000 are more heavily in debt
As for the financial assets of households, the report indicates that although they recorded an annual growth of 5.4% in June 2021 against 7.2% in December 2020; in terms of level, aggregate financial assets decreased between december 2020 and june 2021 by 3 billion ringgit, mainly due to overall retirement savings which were significantly lower due to the i-Sinar and i-Lestari programs.
In the longer term, withdrawing these savings could exacerbate future hardships for some households who are already likely to have insufficient savings for retirement, BNM said.
Cautious central bank simulations suggest that the share of borrowers who would have to dip into pre-existing savings to meet their debts and living expenses over the next 18 months in the event of suspected income and unemployment shocks is likely to be relatively modest, between 11 and 15% of borrowers.
Among these borrowers, those who are most likely to deplete their cash or deposit reserves, and are therefore the most at risk, are estimated to represent a much smaller share (1.9%) of borrowing households.
“About two-thirds (65%) of these at-risk borrowers include those who earn less than RM 5,000 per month and who were also more in debt than other income groups before COVID-19. Banks’ exposures to these most borrowers vulnerable are estimated to represent only 1.3 percent of banking system loans, âhe said.
Most borrowing households therefore appear to have sufficient financial reserves and remain reasonably resilient, with policy assistance measures providing additional reserves against potential shocks.
Bank loans to households are stable, mainly to middle and high incomes
Bank loans to households also remained stable (5.2% year-on-year growth; December 2020: 5%), in particular for guaranteed loans, against a backdrop of a more cautious outlook on credit risk.
About 70% of new disbursements from the banking system in the first half of 2021 continued to flow to middle- and high-income borrowers who have a greater capacity to take on new debt, with 40% and 20% of total new disbursements towards the purchase of residential properties and cars, respectively.
Importantly, loans continued to be supported by sound underwriting standards, with the debt service ratios of newly approved and outstanding household loans held at a conservative level of 41% and 35% (December 2020: 43% and 35%), respectively.
Likewise, the share of borrowers with a debt service ratio above 60% remained at around a quarter of total household borrowers (24%; December 2020: 25%).
A significant proportion (66%) of the debt held by these borrowers is associated with middle and upper income groups who are more likely to withstand financial shocks.
Household debt growth was broadly strong at the end of June 2021, increasing by 5.5% (December 2020: 5.5%) compared to the same period last year, even as more borrowers resumed paying their loans after getting out of the loan moratorium.
However, quarterly trends revealed that household debt growth moderated over this period, as the strong response to various incentives for homeownership and car purchase rolled out to the second. semester 2020 is fading.
The overall ratio of household debt to GDP improved to 89.6% but remained high amid a slow recovery in nominal gross domestic product (GDP).
The Malaysian household debt to GDP ratio was 93.3% in December 2020. – Bernama