“While it is okay to open up a bit (withdrawal) to allow first house purchase, if you open it up too much, it will fuel the housing bubble where you encourage people to buy assets that they may not be able to afford,” said the fund’s CEO, Datuk Shahril Ridza Ridzuan.
As such, the proposed end-financing scheme will only be available to 1Malaysia People’s Housing (PR1MA) homes priced less than RM300,000 each. It will be offered to first-time buyers only.
“We’re in the midst of finalising the scheme,” said Shahril, adding that it will be implemented on 1 January 2017.
He revealed that the scheme will see banks lending more money based on the future income going into the EPF Account 2 of the borrowers.
“Those who intend to come for this scheme in 2017 must make sure they are aware that they are trading off long-term ability to draw down Account 2 for the short-term ability to buy a house.”
To illustrate, an applicant earning a monthly income of RM3,000 can borrow only around RM187,000. But with the special scheme, said applicant will be eligible to borrow over RM295,000.
After choosing the facility, the applicant can no longer avail of all other pre-retirement withdrawals under Account 2, namely education, medical, Hajj and Age 50 withdrawals, until the PR1MA loan is fully settled.
On the possibility of higher interest rates for the end-financing scheme, Shahril explained that it will depend on the banks.
“There are four banks (Maybank, CIMB, RHB and AmBank) working on the scheme. Basically, it’s up to the banks to make the offer. Again, it will be based on their credit assessment. If you have strong credit, then you should get a better rate,” he said.
In case if a loan is defaulted, the Account 2 money will eventually be used even though it cannot be utilised until the loan is fully paid.
“The bank has to foreclose on the house first. For Account 2, when we say ring fence, it’s not a charge on Account 2 to force the members to take out their money. (But) the member will definitely use the money to avoid bankruptcy.”
Moreover, the government has no plans to extend the end-financing scheme at the moment to other affordable housing schemes such as Rumah Selangorku, said Shahril.
“PR1MA is a nationwide housing scheme. So I think it is sufficient to cater to the market,” he added.
Mangalesri Chandrasekaran, Editor at PropertyGuru, edited this story. To contact her about this or other stories email mangales@propertyguru.com.my
