BY: MOHD AMMAR ATAN
Amanah Nasional Youth has praised PR1MA’s intention to help the public own houses following PR1MA’s announcement on the Flexible Funding Scheme (SPEF). However, Amanah Youth feels that the scheme will encourage the citizens to own houses inappropriately.
Based on analysis that we have conducted, we found that through this scheme, PR1MA buyers need to pay higher interest rate which is 4.75% compared the average interest in the market which is 4.45%.
Assuming a unit of house costs RM400,000 and loan duration is 35 years, the monthly instalment will be higher by RM75. Within the 35-year period, buyers would be paying almost RM32,000 more.
This SPEF scheme albeit its best intention, indirectly contributes to the increase in household debts. SPEF entitles PR1MA buyers to borrow far more from a conventional loan.
Through a conventional loan, the amount borrowed is much lower as it takes into account the borrower’s financial ‘health’.
Thus, is it relevant to increase the loan amount so much merely to purchase a house?
Not only that, this scheme increases debt-service-ratio (DSR) where the amount borrowed exceeds the borrower’s income. Under SPEF, DSR is 70% compared to 60% for conventional loan.
Amanah Youth is worried about this as it can lead to “society of debtors”.
At this point, the rate of household debt in Malaysia compared to disposable income is RM140% which is among the highest.
What’s more alarming is that PR1MA buyers can utilise money in their EPF Account 2 to pay for monthly housing instalments. If they choose to do this, hence the 30% monthly contribution into Account 2 will be used for loan repayments.
The effect is that upon retirement, the borrower will get less 30% EPF than the rightful amount. Through this scheme, borrowers are not allowed to access EPF Account 2 if their housing loan is not settled.
Isn’t this rather alarming in view of the 2015 EPF Annual Report itself stating that 68% of EPF members aged 54, have less than RM50,000 in their EPF account.
By right, with the assumption of a RM950 monthly contribution, EPF members should have at least RM228,000 by the age of 55.
Amanah Youth is shocked at how Bank Negara Malaysia (BNM) can approve this inappropriate scheme, while at the same time BNM issues many reports concerning household debt levels in Malaysia and Malaysians’ retirement funds which are shrinking.
Therefore, although AMANAH Youth understands PR1MA’s intention as a statutory body to increase household ownership among the citizens, however we firmly believe that the intention doesn’t justify the means, as it is feared that citizens’ future could stumble into turmoil.
* MOHD AMMAR ATAN is the AMANAH Nasional Youth Exco/ AMANAH National Youth Housing Committee Chairman
PR1MA buyers to pay almost RM32,000 more?
