Banks have no choice but to resort to public auction orders as borrowers struggle to repay their loans.

PETALING JAYA: The market for property auctions has seen a 20% increase of listings following five overnight policy rate (OPR) hikes since May 2022, which resulted in many borrowers being unable to continue making monthly repayments.

Persatuan Perunding Hartanah Muslim Malaysia (Peham) president Ishak Ismail said auctioneers reported a 10% to 20% increase of listings since the implementation of the lockdowns during the height of the Covid-19 pandemic in 2020, Utusan Malaysia reported.

“Since November last year, banks have started procedures to obtain public auction orders from the courts or land offices.

“This was expected due to the increase in the OPR (with subsequent higher repayment instalments) and borrowers no longer being able to repay their loans because many lost their jobs following the closure of several industries during the lockdowns,” he was quoted as saying.

Ishak said banks had no choice but to resort to public auctions to recover their loans as borrowers were unable to continue making repayments, and this was expected to continue for the next two years.

On May 3, Bank Negara Malaysia (BNM) raised the OPR by 25 basis points (bps) from 2.75% to 3%, after hitting the pause button at the Monetary Policy Committee (MPC) meetings in January and March. This brought the OPR to its pre-pandemic level of 3%.

Before that, BNM had raised the OPR by a total of 100bps between May and November last year.

Last Thursday, BNM announced that the OPR will be maintained at 3%.

Ishak said it was difficult for house owners to sell their properties as they struggled to find borrowers who meet the loan criteria set by banks.

He claimed that 70% of those who wished to buy a house were not eligible for a loan because they failed to meet the requirements.

He said banks should consider making it easier for borrowers to obtain loans by extending the repayment period to 40 years, which would reduce the monthly repayment rates.

“The rent-to-own concept should also be supported by banks. If this mechanism receives government support, it will undoubtedly revitalise the property market,” he said.