THE Covid-19 pandemic has severely impacted the global economy. Malaysia has not been spared its effects, with many businesses closing permanently while many more struggle to recover to pre-pandemic levels. Some employees have taken pay cuts while others have lost their jobs, with unemployment rates reaching record highs.Even though the civil service has been fortunate enough to be spared similar situations, many are also struggling as the pandemic has caused the price of many goods and services to increase, especially essential items such as food. In addition, personal expenses have also increased as we have to buy masks and sanitisers to comply with Health Ministry guidelines.
This increase in the cost of living leaves civil servants needing more disposable income. While most private sector borrowers enjoyed the loan repayment moratorium for six months regardless of their employment status and salary, civil servants with government loans were not offered the same privilege.
Furthermore, while Bank Negara Malaysia cut the overnight policy rate (OPR) to a historic low of 1.75%, thus reducing effective interest rates for home loans from a majority of banks to about 3% (depending on amounts borrowed), the Public Sector Home Financing Board (LPPSA) – the statutory body tasked with administering housing loans for civil servants – is still charging a 4% fixed interest rate.
The government housing loan is supposed to be an employment benefit for civil servants, just like a pension. However, when current housing loan interest rates in the private sector are below 4%, this benefit feels like a punishment and burden.
In the 1990s, home loan interest rates were between 8% and 10% before peaking above 12% during the Asian financial crisis in 1998, so the 4% fixed rate was indeed a blessing, as it assisted many civil servants with relatively lower salaries compared with their private sector counterparts to own homes.
Therefore, the government, particularly the Finance Ministry, should look into improving the welfare of civil servants now by reviewing and reducing the current government housing loan interest rates.
For a start, the 4% fixed interest rate should be reduced to the current market average of about 3%; it can be capped at 4%. When Bank Negara Malaysia reduces or increases the OPR in future, the interest rate can move in tandem (based on market averages) but never exceeding 4%.
This would not only ease the financial burden of many families but also support the government’s move to encourage home ownership among Malaysians. In fact, the predicament of property overhang faced by developers would also ease with this move, killing three birds with one stone.
Cuepacs (the Congress of Union of Employees in the Public and Civil Services) Malaysia should include this as one of its demands to the government. Given the country’s current economic and financial situation, this proposal seems more realistic and feasible compared with demands for higher wages and bonuses.
Indirectly, this measure would also provide a much needed stimulus to the country’s deteriorating economy.