Govt open to discussing lower housing loan interest rate for civil servants

The government is willing to discuss lowering the interest rate of 4% for housing loans for civil servants, as long as there is a proper basis to do so, Deputy Finance Minister Datuk Donald Lim said yesterday.
Responding to calls by various groups to lower the interest rate in the light of soaring prices of homes, he said as far as the government was concerned, economic factors have to be considered before any change can be made.
“The government is open to discussion, but there must be some basis and justification for the complaints as we have to ensure that we can sustain it,” Lim said when contacted.
“We have to ensure those who borrow can afford to pay. Right now, we have 241,000 bankruptcy cases, of which housing loans constitute 13%, so we need to look at everything.”
Cuepacs secretary-general Lok Yim Pheng had on Monday urged the government and housing developers to lower the interest rate and extend the loan repayment period to lessen the burden on civil servants.
“A civil servant who receives a salary of about RM3,000 and buys an apartment costing RM160,000 to RM200,000, would have to pay around RM520 to RM1,000 monthly to service the loan,” she said in a statement.
Cuepacs finance secretary Jaapar Mansor had on May 27 revealed that more than 60% of civil servants earning below RM3,000 were unable to afford homes, especially in the city.
He urged the government to take the initiative in tackling the issue, including reducing housing loan interest to 1% and increasing civil servants’ incomes.
However, House Buyers Association secretary-general Chang Kim Loong said setting the rate at 1% would not be sustainable. A more reasonable figure for the government to consider is reducing the interest rate to 2.5% to 3%.
“The interest rate of 4% was implemented at a time when interest rates for homes were very high, around 12%. Interest rates today are very low, and so correspondingly, the interest rate for civil servants should drop as well,” he said.
The 4% rate was introduced in the 1970s, and has not been adjusted since. The base lending rate (BLR) is now 6%, and many banks offer housing loans with interest rates below this figure.
Real Estate and Housing Developers Association past chairman N.K. Tong said it was up to the government whether to lower the interest rate or provide longer repayment periods.
“It would make sense to correspondingly reduce the interest rate so houses can become more affordable for civil servants,” he told theSun yesterday.
Chang also said many house buyers complained they had been penalised by housing developers when the Treasury was slow in disbursing their payments.
However, Treasury Housing Loan Division deputy secretary (operations and finance) Dr Chen Chaw Min told theSun the issue had been dealt with and the division achieved a 96% success rate of disbursing payments on time.
“We have been working to address this mechanism flaw over the past three years and now there are only a small number of complaints regarding late payment,” he said.
“Also, if we are responsible for the delay in payment, we write to the developer and explain what happened, and normally the developer gives a waiver,” he said.