JAKARTA. The Financial Services Authority (OJK) and Bank Indonesia (BI) are mulling over revising the current loan-to-value (LTV) policy in an effort to spur higher credit demand.
OJK chairman Muliaman D. Hadad said that it was timely to revise the policy, adding that the OJK was involved in a series of discussions with the central bank to come up with the revision.
“A revision may stimulate the economy, which is lagging at the moment. So we want to give room for related industries to grow with a more lax requirement,” he said.
The LTV policy is currently implemented on both mortgage and automotive loan segments. It was introduced by the central bank in 2012 with the goal of curbing excessive mortgage and automotive loan growth, and to ease property speculation.
With the LTV policy in place, people must provide at least a 30 percent down payment if they want to apply for a mortgage to finance the purchase of their first house, sized more than 70 square meters.
The down payment requirement then increases to 40 percent for a mortgage to finance the purchase of a second house and rises to 50 percent for the next purchase.
In automotive, the down payment requirement is set between 20 percent and 30 percent for each purchase.
The policy has been deemed successful in putting the brakes on both credit segments as the growth rates have slowed quite significantly.
Banking statistics show that home loans grew at an annual rate of 12.6 percent only to reach Rp 316.51 trillion (US$24.43 billion) in 2014. It was much lower than the 21.7 percent rate that the statistics recorded in 2012.
BI spokesperson Tirta Segara also acknowledged that the LTV policy had been effective in reducing credit demand, especially in the 70 sq m home market.
“But we have not formulated a specific down payment ratio for the new policy. For mortgages, it will depend on various factors, such as home size, location or its price,” he said.
Bankers say that they are optimistic about the planned revision, as it is expected to revive the home and automotive markets.
Bank Negara Indonesia (BNI) consumer banking director Anggoro Eko Cahyo said that the lender’s loan achievement might exceed the target if the new revision was put in place.
“We are eyeing between 15 percent and 17 percent growth in mortgages this year, but it may go higher than that, supported by the policy,” he said in a telephone interview.
Last year, BNI’s mortgage segment stood at Rp 33.34 trillion, a 5.1 percent rise only from 2013.
Bank Central Asia (BCA), a major player in the home loan market, also expects to see domestic mortgage and its supporting businesses get back on their feet again with a change in the LTV regulation.
BCA individual banking director Henry Koenaifi said that it aimed to post 5 to 8 percent mortgage growth and 3 to 5 percent growth in automotive loans in 2015.
He said that the private lender began to slash its mortgage interest rate in the fourth quarter of 2014 to cope with the LTV impact. “We recorded a 20 percent increase in loan bookings,” he said. (Tassia Sipahutar)
