Bank Negara moratorium: Should you still pay your home loan?

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By Vigneswar Rajasurian

Bank Negara Moratorium Paying Your Home Loan

Bank Negara Malaysia (BNM) has ordered all banks in Malaysia to grant an automatic six-month moratorium on loan and financing repayments effective April 1, 2020.

The move is made as part of the Central Bank’s measures to ease the plight of borrowers facing financial difficulties due to the impact of Covid-19.

What does the moratorium mean here?

A moratorium is a temporary prohibition of an activity. In this context, the moratorium means that individuals and small-medium enterprises (SMEs) will be able to delay the payment of loans including mortgages (home loans) and hire purchases (car loans) for a grace period of six months.

The deferred loan repayment applies to all loans meeting the qualification criteria below:

  • Ringgit denominated loans and;
  • without an outstanding amount exceeding 90-days as at April 1, 2020.

The moratorium period does not apply to credit card balances.

However, Bank Negara stated customers should be offered the option to convert the credit card balances into a term-loan not exceeding three years.

Since the moratorium is merely a delay in payments and not a waiver, customers will likely be given the option to settle the loans due by extending the loan tenure by six months or paying a slightly higher sum in monthly instalments after the moratorium ends.

The application of the moratorium is automatic; hence no application is necessary.

Deferring the payments during the moratorium period does not affect your CCRIS score.

For more detailed information on the moratorium, please refer to Bank Negara's 'Frequently Asked Questions' (FAQ) available here.

Meanwhile, banks have been tasked with providing sufficient information to customers on the mechanics of the deferred payments, including allowing borrowers to opt-out and continue loan repayments as per usual.

This begs the question:

Should you opt to continue paying your home loan?

Even if you can afford it, you might want to consider holding off on mortgage payments as per the six-month moratorium.

Even if you can afford it, you might want to consider holding off on mortgage payments as per the six-month moratorium.

A mortgage is the amongst most beneficial types of loans there are given the relatively low-interest rates compared to other loans and given real estate is more often than not an appreciating asset especially by the end of the mortgage tenure.

Despite the numerous advantages of property investment, liquidity matters most during times of economic uncertainty; hence cash is king.

And the six-month moratorium period offered every Malaysian, regardless of wealth status, the opportunity to save an extra sum of cash in hand.

There are plenty of prudent uses for the money saved, which include:

  • Saving more for another rainy day
  • Investing in unit trusts that exceed the mortgage interest rate
  • Using the cash as a buffer period as tenants may not be able to pay rental
  • Home renovations that add value and attract new tenants
  • Clear off the credit card debt

If you’re interested to know why a mortgage is often touted as a ‘good debt’ then stay tuned for further articles on the topic.


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