KUALA LUMPUR: First-time home buyers should ensure they meet the affordability criteria before buying a home to avoid taking on a debt burden they cannot handle.

Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said banks had provided individuals 'many flexible ways' for them to meet the affordability requirements.

'They must, and if they can, demonstrate even if they are sole proprietors and they are not employed in any organisation or corporation that they can prove that they have met the affordability criteria in many different ways. Banks have given that flexibility.

'It's worse when somebody buys a house and in the end, he or she is not able to have the basic needs because of the debt burden they have taken on,' she said on the sidelines of the Malaysia-OECD High-Level Global Symposium.

She added that it was worse if the first-time home buyer was not able to service the loan in the end. 'The house will be repossessed and they can end up in bankruptcy. We certainly don't want that to happen,' she said.

There have been increasing calls for the central bank to ease the stringent lending policy, especially for first-time home buyers. This is in efforts to reduce the rising number of unsold properties in Malaysia.

National House Buyers Association honorary secretary-general Chang Kim Loong had earlier told StarBiz that Bank Negara could allow a directive for banks to provide 100% financing for first-time house buyers, subject to conditions.

At the moment, property financing for first-time home buyers was based on a case-to-case basis.

However, Zeti said that Bank Negara had always had more flexible policies for first-time home buyers. 'What we want is to ensure that the measures we have taken is that houses remain affordable for such first-time home buyers. Therefore, the loan-to-value ratio for first-time home buyers is different,' she said.

Meanwhile, she also said the redemption by foreign investors of maturing Malaysian Government Securities would not impact the country's foreign reserves.

'No, it won't impact our foreign reserves because the bonds are ringgit-denominated instruments,' she said.

Malaysia's domestic institutional investors would support the bond market if there should be a sell-off by foreign investors, she added.

Market talk is that foreign investors might decide not to reinvest, following the expiry of some RM11bil worth of the Government bonds.

'We have our own domestic institutional investors like the Employees Provident Fund, Permodalan Nasional Bhd and Lembaga Tabung Haji. Also, the insurance industry is a major player in the bond market. So, our own institutional investors will step in to purchase these bonds.

'So, we don't expect any collapse in our bond market,' Zeti said.

She added that the country's financial system was able to intermediate inflows and outflows very well.

The outflows during the global financial crisis in 2008 and 2009 were much more significant, and Malaysia was able to intermediate those flows, she said.