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Growth In Household Borrowings Continues To Slow


KUALA LUMPUR, MArch 24: Household borrowings from banks and non-banks expanded by 7.3% as at end-2015, extending the slower pace of growth since 2010, mainly due to a sustained slower expansion in financing for personal use and robust financing for house purchases.

According to the Financial Stability and Payment Systems Report 2015 issued by Bank Negara Malaysia (BNM), financing for personal use grew 4.6% while financing for house purchases remained robust at 11%.

The level of household debt-to-gross domestic product (GDP) ratio remained elevated at 89.1% in 2015 but the capacity to service debt remained firm, supported by a broadly stable domestic employment and income outlook.

Borrowings by highly leveraged lower income households that earn RM3,000 or less a month has declined further, to account for 23.6% of total household debt or 20.4% of total banking system financing to the household sector.

“A moderation in the level of indebtedness for this group is likely to be gradual given the relatively long average remaining maturity of household borrowings (about nine years). However, continued income growth and a deceleration in new financing growth will contribute towards reducing leverage over time,” it said.

Lower income households are supported by various financial assistance programmes provided by the government and households that are already highly leveraged have more than half of their borrowings in the form of fixed rate financing which reduces their sensitivities to changes in financing cost.

Aggregate household financial assets grew by RM97.9 billion last year while household debt grew by RM70.4 billion. Deposits and deposit-like instruments continue to form the major component (43%) of household financial assets.

Aggregate household financial asset-to-debt ratio has remained above two times while aggregate household liquid financial asset-to-debt ratio has remained in excess of 1.4 times, preserving ready access to funds for households to meet debt obligations.

For the year as a whole, the overall average lending rate for all new loans to households averaged at 5.1% (2014: 4.9%).

Outstanding personal financing granted by non-bank financial institutions (NBFIs), including major credit cooperatives, recorded a lower increase of RM3 billion (2014: RM4.4 billion).

The central bank said it continues to work closely with the Malaysia Co-operative Societies Commission to promote further improvements in loan affordability assessments, particularly among the medium- and large-sized credit co-operatives that account for the bulk of personal financing to households.

“An inappropriate easing of lending standards by NBFIs remains a concern that could impose excessive financing burdens on households over the long term and increase arbitrage risks. Financial education of borrowers and close vigilance will thus remain important.

“Towards this end, the Credit Counseling and Debt Management Agency has continued to expand its outreach, providing financial counseling and advice to over 80,000 individuals in 2015.”

Household impaired loans and delinquencies remained low across all types of financing facilities, despite higher delinquencies in selected segments namely, compact car hire purchase and personal financing.