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35-year mortgage unlikely to help RI homebuyers, experts say
The plan was proposed by the Public Works and Housing Ministry in December of last year, and a pilot project is set to launch this year.
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The picture shows a partially constructed subsidized housing complex in Tasikmalaya city, West Java, on Aug. 8, 2017. (Antara/Adeng Bustomi)
T
he government is considering extending the maximum home mortgage tenor to 35 years to provide more affordable monthly payments for lower-income households, but experts say the policy is unlikely to be much help in solving the country’s housing issues.
The plan was proposed by the Public Works and Housing Ministry in December of last year, and a pilot project is set to launch this year. Currently, the maximum legal mortgage tenor is 30 years.
The ministry is also seeking to introduce a flat interest rate throughout the repayment period.
Currently, banks often offer a mixed scheme with a flat rate for the first few years of the mortgage, followed by a floating rate in subsequent years.
“So, this new [flat rate] product is definite. All that’s left to do is [to decide] the tenor,” said Herry Trisaputra Zuna, the ministry’s public works and housing infrastructure financing director general, in December 2023, as quoted by Bisnis.
He went on to say that the plan would be incorporated into the country’s subsidized housing program for lower-income citizens.
A longer tenor could allow for smaller, less burdensome monthly payments, but it could also translate to higher interest rates given the bank’s longer period of exposure to loan risk.
