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GEORGE TOWN (Nov 5): Extending the housing loan term to 90 years or more may help reduce the overhang of property stocks, but are the children ready to shoulder the burden?
The concern was raised by Kebun Bunga assemblyman Jason Ong Khan Lee in response to a proposal by the state government to Bank Negara to introduce generational loans to mitigate the problems on securing financing for first-time homebuyers, reported The Star today.
The proposal was brought up before Budget 2019 was tabled in Parliament.
The Penang assemblyman cautioned that such long housing loan terms should not be approved “merely to help developers clear stock”.
He urged the government to conduct a study before permitting banks to offer the multi-generational loan.
“The children, although of legal age to be signatories of the loans, will be unable to fully grasp the consequences of having to service a loan for the next 30 years after their parents,” he said in a statement.
“Two years ago, lawmakers in Sweden limited the 140-year mortgage period to a maximum of 105, in view of rising house prices and increasing debts.
“The only upside to a generational loan is that the purchase price and all subsequent repayments are locked in using the original sales price,” he added.
He said market forces should not be interrupted by too much government intervention.
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