When house ownership remains a dream

IN Australia, the large banks have started to slash their mortgage rates to get business amid falling credit growth and intense competition.

According to a Reuters report, Australia and New Zealand Banking Group (ANZ) on Thursday decreased its variable mortgage rate by 34 basis points to 3.65%, three days after the country’s largest lender, Commonwealth Bank of Australia (CBA), lowered some of its fixed mortgage rates by 10 basis points on “competition grounds”.

Consumers will be the obvious beneficiaries.

In Malaysia, Bank Negara retained the benchmark overnight policy rate (OPR), which determines mortgage rates among others, at 3.25% last month.

Expectations are for the central bank to leave the OPR unchanged at 3.25% through the rest of this year and next, which also suggests that mortgage rates here are probably not going to be revised downwards for some time.

Amid this, there have been calls to help alleviate the financial burden of more of than not, young house buyers who mostly fall under the lower-income category.

Rehda Institute, the training, research and education arm of Rehda Malaysia for instance, proposed last month an interest subsidy for lower income earners in which they only pay interest at a subsidised rate for the first five years of their mortgage loan tenures.

Prior to this, there have also been calls for housing loan interest rates in Malaysia to be lowered.

As of January, the average interest rate for housing loans here is about 4.65%.

In all of this though, the bigger issue remains in that for a sizeable group of average Malaysians, owning their own home remains a dream regardless of interest rates. Facts seem to support this.

The Department of Statistics Malaysia and National Property Information Centre recently revealed that the median monthly salaries in Malaysia grew at a compound annual growth rate (CAGR) of about 6% from 2013 to 2017 while the Malaysian House Price Index saw a CAGR increase of 7.56% over the same period.

With wages increasing at a slower pace than house prices, is it any wonder that house ownership remains a dream for many?