Business

M’sia moves to rein in household debt

Published: 4:02 AM, July 6, 2013

KUALA LUMPUR — Malaysia’s central bank imposed a maximum tenure for mortgages and personal loans yesterday, joining Singapore in implementing measures to limit risks stemming from rising household debt.

Levels of household indebtedness have been increasing at a “strong” pace and averaged 12 per cent per annum in the past five years, Bank Negara Malaysia said yesterday.

Banks and other credit providers can now provide mortgage financing of not more than 35 years, from a previous tenure of as long as 45 years, it said.

The central bank also capped personal loans at 10 years and banned the offering of pre-approved personal financing products. All measures are effective immediately.

“There has been a growing trend in the offering of financial products that are not in the long-term interest of consumers,” the central bank said.

“Such practices encourage excessive debt accumulation by households and increase the vulnerability of this sector.” BLOOMBERG