By NUR HAZIQAH A MALEK / Pic By MUHD AMIN NAHARUL
The growth of household debt has slowed further to 4.7% in 2018 from 4.9% in 2017 on slower growth in loans extended by non-bank financial institutions (NBFIs), according to Bank Negara Malaysia’s Financial Stability and Payment Systems Report 2018.
Household debt remained elevated in 2018, although the household debt to-GDP dropped slightly to 83% at end-2018 from 83.8% in 2017.
The primary contributor to household debt growth is still residential property loans, though lending has been curtailed due to the reduced housing affordability.
At the aggregate level, households remained well-placed to manage debt repayments, cushioned by continued income and employment growth, while the ratio of household assets-to-debt remained at four times though it expanded at a slower rate.
While household debt remains elevated, the risks it presents to financial stability are mitigated as macroprudential measures implemented in 2010 have guided a more sustainable growth pace in household debt, while recent debts are expanding more in line with income, it noted.
Personal financing (PF) growth, which drove earlier rapid expansion in household debt, has moderated with NBFIs accounting for over 40% of total PF. This led to share of PF to total household debt to trend downwards to 14.5% as at end-2018, against a peak of 16.4% recorded in 2013.
According to a sensitivity analysis that simulates income, cost of living and borrowing cost shocks on borrowers’ financial margin (FM) — potential losses to the banking system from borrowers with a negative FM are estimated to remain within banks’ excess capital buffers of RM143.1 billion as at end-2018.
House prices continued growing moderately at 4% in the first half of 2018, with preliminary data for the third quarter suggesting a further moderation to 1.1%.