KUALA LUMPUR, Jan 29 — Bank Negara Malaysia (BNM) today launched its RM1 billion Fund for Affordable Homes to assist the Bottom 40th percentile households in financing their home purchases.

At the launch, Finance Minister Lim Guan Eng said the scheme will help B40 buyers who were facing difficulty in obtaining mortgages owing to financial illiteracy and the strict lending guidelines.

"The fund’s establishment complements the government’s effort to ensure the welfare of the lower-income earners in possessing affordable homes is achieved.

"As of November 2018, the accumulated housing loan amount from financial institution increased as much as 7.7 per cent to RM555.5 billion and 70 per cent were first-time home buyers for houses priced RM500,000 below,” he said during the launching ceremony at Sasana Kijang here.

In November, BNM announced it would establish the fund to help home buyers from the lower income group nationwide to finance the purchase of their first homes, pursuant to the announcement in Budget 2019.

BNM has long been the subject of complaints from both buyers and sellers who insist the central bank’s lending guidelines were resulting in high loan rejection rates for property purchases.

Lim also pointed out that unsold residential properties nationwide has risen to 30,115 units in the third quarter of 2018, a 48 per cent increase from 2017.

"It is not there that are no buyers, but these low-income earners are unable to obtain loans to buy these properties.

"This contributed to the difficulties faced by the federal and state governments from building more houses as they are unable to recoup their costs,” he said later during a press conference.

He said the government is trying to find a "happy” compromise to see whether it could fulfill expectations and allow those who were denied loans in the past.

"If this is not effective, we will need to come up with creative ideas continuously such as peer-to-peer lending to solve this ‘last mile’ problem of (homebuyers) not being able to get financing and we are trying to reach that,” he said.

Lim said the government may consider extending the two-year operational period for the fund to three years if the response is encouraging.

"To date there have been 16 applications (five approved, 11 pending approval) since January 2 and I think that is a good development even though there was no prior public announcement.

"If there is room to manoeuvrer, I think an extension would not be a problem,” he said.

Separately, Housing and Local Government Minister Zuraida Kamaruddin said there might not be a need to replenish the fund in the future if other measures also bear fruit.

"The scheme is aimed at educating the B40 group through BNM’s Credit Counselling and Debt Management Agency (AKPK) in how to manage and plan their finances to own a home.

"In the future they will work hard towards owing a home while we ensure they comply with the terms set,” she said.

To qualify for the scheme, applicants must be a Malaysian citizen from a household earning up to RM2,300 monthly; a first-time homebuyer; a salaried worker or self-employed; have no record of impaired financing for the past 12 months; with financing under the fund available to single or joint borrowers (also must be Malaysian citizens).

The fund is available at five participating financial institutions: AmBank, Bank Simpanan Nasional, CIMB Bank, Maybank and RHB Bank.

The maximum financing rate is 3.5 per cent per annum with a maximum tenure of 40 years or up to 70 years of the applicant’s age, whichever is shorter.

The scheme is limited to only residential properties (landed, flats and apartments) in the primary market priced at RM150,000 and below.

Buyers must also undergo a mandatory free online financial education module called "Rumahku” managed by AKPK for the applications to be processed by the participating financial institutions.