New mortgage ruling will not demand for mortgage loans, say research houses

KUALA LUMPUR: Bank Negara Malaysia's (BNM) move to place a limit on the loan-to-value ratio (LVR) for people taking out third mortgages will not have a drastic impact on demand for mortgage loans, said research houses.

BNM yesterday imposed a maximum LVR of 70% for a third and subsequent housing financing facility taken by a borrower.

OSK Research Sdn Bhd, in its research note, said financing facilities for the purchase of the first and second homes were not affected and borrowers would still be able to continue obtain financing for these purchases.

"Assuming that residential property loans growth moderates by 50% due to BNM's more stringent credit lending restrictions, the total industry loans growth could be coming in at 10% to 10.5%, which is at the upper end of market estimates," it said.

The research house said as the slowdown in global exports and business sentiment could adversely affect business loans growth, banks would still need to sustain aggressive mortgage lending to meet their loans growth targets.

"Thus excessive future credit restrictions by BNM on residential properties could be counter-productive as this would encourage banks to redirect more of the liquidity to higher risk unsecured loans or lumpy corporate loans or drive mortgages more aggressively via irrational pricing on loans, which will hurt margins," it said.

The research house maintained its 'overweight' call on the Malaysian property and hoped that investors take the opportunity to accumulate on mid- to high-end residential properties.

Meanwhile, ECM Libra expected an increase in supply of newly-completed properties from 2011 to 2012.

It said the influx of these new supplies and increasing launches by developers going into 2011 may see a rather competitive market. -- Bernama