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Bankers welcome new LTV policy, expect little impact this year
Bankers have welcomed the newly revised loan-to-value (LTV) policy on property and automotive credits, although they say that it will have minimum impact on their full-year business, given there is only six months left for its implementation
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Bankers have welcomed the newly revised loan-to-value (LTV) policy on property and automotive credits, although they say that it will have minimum impact on their full-year business, given there is only six months left for its implementation.
Bank Indonesia (BI) issued the new policy on Wednesday, setting higher LTV ratios for both property and automotive loans.
With higher ratios, customers are now given lower down-payment requirements and the policy is expected to trigger higher sales of houses, apartments, shop houses, cars and motorcycles.
According to Bank Central Asia (BCA) individual banking director Henry Koenaifi, the revised policy is a positive development for the banking industry because it had long expected to see an easing in the property and automotive segments.
He, however, argued that it would do little to boost BCA's full-year mortgage and automotive lending portfolios. 'It will probably boost [mortgages] by 5 to 10 percent [within the next six months],' he told The Jakarta Post.
Minimal impact would also be seen in its automotive lending, Henry said, adding that the new down payment requirement for cars should have been set even lower at 15 percent ' from the current 20 to 25 percent ' of the price to trigger demand.
Latest banking statistics show that BCA had one of the largest shares in both the mortgage and automotive markets.
Its outstanding mortgages totalled Rp 54.77 trillion (US$4.11 billion) as of March, making up 15.9 percent of the industry's total mortgages.
On the other hand, the amount of its automotive loans, including those disbursed by subsidiaries BCA Finance and CS Finance, reached Rp 36.45 trillion in March, equal to 29.5 percent of total vehicle loans.
According to Henry, the private lender will only feel the full effect of the LTV next year as it expects the revised policy to jack up its mortgage lending by 12 to 15 percent.
Meanwhile, state lenders Bank Negara Indonesia (BNI) and Bank Mandiri also expect to see the new LTV attract customers who previously put their home buying plans on hold.
'It may become more affordable for them to purchase a house,' BNI consumer banking director Anggoro Eko Cahyo said on Thursday.
Anggoro likewise said that given the limited time left for its implementation it would be quite difficult for the policy to be fully effective.
'Also, it will depend on each customer's urgency to own a house. Some may think this is the right time with the lower down payments, but some others may continue to postpone buying a house because of the current economic slowdown,' he said.
'We can't predict yet how much increase in loans that we will see because of the new policy,' he added.
The bank records around Rp 600 billion monthly in new mortgages and it is aiming for a total 10 percent rise to Rp 36.67 trillion in its outstanding mortgages by the end of the year.
The figure stayed at around Rp 33 trillion in March, unchanged from its December 2014 position.
Separately, Mandiri consumer banking director Hery Gunardi said that the state lender would need time to analyze the full effect of the LTV revision to its business.
'An uptick in mortgage demand will not only be influenced by LTV revision. It will also be influenced by purchasing power, which may be difficult to boost because of the current macroeconomic situation,' he said.
