Government Proposal for Youth Housing Financing Scheme Under Fire

Financial Experts Warn of Debt Trap

PETALING JAYA: The government’s proposal to extend the repayment period for housing loans has drawn criticism from a financial expert and stakeholders, who claim it will only set a debt trap for borrowers.

Certified financial planner Kelvin Goh of Ringgit Minded said borrowers will end up paying more in interest, while National House Buyers Association secretary-general Chang Kim Loong said it will only benefit banks and developers.

Risks of Longer Mortgages

Goh pointed out that a longer mortgage will only delay the borrower’s financial freedom.

He said individuals with limited financial literacy might buy into schemes that offer lower monthly instalments, leading to them “over-committing to expensive homes”.

Goh warned that longer mortgages will lead to a phenomenon known as “second-generation loans”, where children are forced to pay the monthly instalments when their parents pass away.

“This is especially true for B40 families, where retirees may struggle to continue paying mortgage instalments, forcing their children to hold onto properties they do not need or cannot afford to maintain.

“Children will then become trapped in financial obligations they did not ask for, which limits their financial freedom,” he told FMT.

Government’s Youth Housing Financing Scheme

Tabling Budget 2025 on Oct 18, Prime Minister Anwar Ibrahim said the Public Sector Home Financing Board will introduce a youth housing financing scheme to enable young civil servants to apply for housing loans with tenures of up to 40 years.

More recently, it was reported that the finance ministry, Bank Negara Malaysia and the housing and local government ministry will be discussing several new proposals, one of which is to provide long-term mortgages under the National Housing Policy.

Currently, housing loans have a maximum tenure of 30 years.

Consequences of Longer Loans

Goh pointed out that civil servants who opt for a 40-year mortgage should be prepared to continue making monthly payments even after they retire.

“This is not ideal since retirement is meant to be enjoyed, not spent paying off debt,” he said.

Expert Disagreement

Former Umno leaders Khairy Jamaluddin and Shahril Hamdan disagreed that extending housing loan terms would be a solution to the affordable housing shortage crisis.

In their Keluar Sekejap podcast last week, Khairy described longer mortgages as “debt until death”.

He said it would lead to financial problems for buyers but will not solve the real problem of too many unaffordable homes.

Conclusion

The government’s proposal to extend the repayment period for housing loans has sparked controversy among financial experts and stakeholders. While the intention may be to make housing more affordable, the risks of longer mortgages and the potential for debt traps are significant. It remains to be seen how the government will proceed with this proposal.

FAQs

* What is the government’s proposal?
The government is proposing to extend the repayment period for housing loans to 40 years for young civil servants.
* What are the concerns of financial experts and stakeholders?
They warn that longer mortgages will lead to a debt trap, increased financial burden, and limited financial freedom for borrowers.
* Will longer mortgages solve the affordable housing shortage?
No, according to experts, the real problem is too many unaffordable homes, and longer mortgages will not solve this issue.