The Malaysian government followed Singapore with steps to rein in what it sees to be “excessive” lending to households and individual property buyers.

The country’s central bank ruled that property buyers will no longer have the option to take loans for longer than 35 years. Anyone taking a personal loan can now only do so for a period of up to 10 years. Before the new caps, property buyers could take loans for up to 45 years, while personal loans could be paid back over a period of up to 25 years.

Although a longer loan term may reduce monthly repayments, it encourages “excessive debt accumulation” and saddles consumers with heavier overall debt burden, the central bank said in a statement on July 5.

The move comes on the back of surging household debts in the country. Malaysia’s household-debt-to-GDP ratio is a high 83 per cent. It is the highest in emerging Asia and was increasing 12 per cent per year in the past.

The measures are mandatory for all financial institutions and credit cooperatives regulated by Bank Negara, the Malaysia Co-operative Societies Commission, Malaysia Building Society Bhd and Aeon Credit Service.

The central bank also announced a ban on “pre-approved personal financing products” – unsolicited loan and credit card offers – effective immediately.

“The key credit providers are required to observe prudent debt service ratios in their credit assessment to ensure households have sufficient financial buffers to protect them against rising costs and unexpected adverse events,” the central bank said.

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