Housing Loan Repayment Behaviour in Malaysia: An Analytical Insight Volume 20, No. 2 September, 2021

Housing Loan Repayment Behaviour in Malaysia: An Analytical Insight

Asish Saha

FLAME School of Business, FLAME University, India

Hock-Eam Lim

School of Economics, Finance, and Banking, Universiti Utara Malaysia, Malaysia

Goh-Yeok Siew

School of Economics, Finance, and Banking, Universiti Utara Malaysia, Malaysia

Abstract

The present study aims to decipher the drivers of default status (no default, single default, double default, and default to good) of 43,156 home-loan borrowers of a large home-loan lender having a national presence during 2003-18. Using the Multinomial Logit model, we analyse the repayment behaviour controlling the borrowers' loan and socio-demographic characteristics. We find house equity, loan, and borrower characteristics,and ability to pay are the key determinants. We also find that both double default and first default are higher at lower growth rates of house prices. Non-linearity and the inflection points in the profile of age, loan age, loan term, payment to income ratio, loan to value ratio,  and loan interest rates vis-a-vis loan default status are significant findings. Tapering-off of default due to seasoning beyond a threshold year is notable. The study is the first of its kind, which uses granular data in its analysis, and hence the results would prove immensely beneficial in the policy formulations and managerial decisions.

Keywords：Default Status, Home Equity, Housing Loan Default, Non-Linearity and the Points of Inflection, Multinomial Logit Model.

JEL Classifications：D14, G21, G28, G32, G33, R20.

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