Macroeconomic Determinants and Mortgage Debt Accumulation: Evidence from Malaysia
Journal Title: International Journal of Academic Research in Business and Social Sciences - Year 2018, Vol 8, Issue 11
Abstract
The statistics of the household debt in Malaysia is among the highest in the ASEAN region with the biggest portion of the household debt goes to pay off the mortgage debt. As accommodation is one of the basic needs required by all households regardless of the price offered, concerns are given to the household affordability to live in a decent economy. The escalating trend of household debts related to mortgage is due to the increase in house prices, fluctuation in interest rates and speculative activities taken by investors. Thus, the aim of the study is to examine the relationship of principal drivers on mortgage debt accumulation using macroeconomic determinants. The macroeconomic determinants were represented by house price index (HPI), interest rate (IR), gross domestic product (GDP) and living cost (LC). The data set was analyzed between the period of 2006 till 2016 on a quarterly basis. Multiple regression analysis was applied to test the statistical relationship between the macroeconomic determinants and the mortgage debt. Several diagnostic tests also being conducted to ensure that the proposed model in this study adequately describes the time series under consideration. The empirical findings revealed that the accumulation of mortgage debt in Malaysia is driven primarily by three key factors: house price index, interest rate, and living cost. The living cost has been identified as the most significant factor that leads to high accumulation of mortgage debt in Malaysia. However, income (which is represented by GDP) does not give any significant impact towards the accumulation of mortgage debt. This implies that capital appreciation in the property market has made households stretch out their mortgage financing to own a house to fulfill their basic needs; without considering their level of income. The implication of this study is critical to deliberate for further analysis as easy access to mortgage debt may lead to default or sub-prime crisis. By understanding the principal macroeconomic drivers that influence the accumulation of mortgage debt, this would contribute to the body of knowledge, and subsequently the legislator who can take the necessary actions to mitigate the issues of escalating prices in the property market, and how best to balance between the macroeconomic policy and the related policies designed to stabilize the housing market, and to contain the mortgage debt from upward bubbling.
Authors and Affiliations
Aqilah Nadiah Md. Sahiq, Siti Nursyafiqah Sukardi, Noor Hasniza Haron, Shafinar Ismail, Rozana Othman
Keywords
Related Articles
- EP ID EP573296
- DOI 10.6007/IJARBSS/v8-i11/4887
- Views 53
- Downloads 0
Obstacles to Employability Skills Training Programs in Malaysia from the Perspectives of Employers’, Educators’ and Graduates’ Perspective
Over the last two decades, employability skills training programs initiated by the Malaysian government and agencies are an essential strategy to improve the skills of the workforce and minimize unemployment. However, st...
Using Altman’s Z score (Sales/Total Assets) Ratio Model in Assessing Likelihood of Bankruptcy for Sugar Companies in Kenya
The purpose of this study was the use of sales/total assets as one of the z score ratios model in predicting likelihood of bankruptcy of sugar companies in Kenya. The focus of the study was on the following public owned...
Factors affecting Local Leaders’ Perception on the adaptation Ability of Malaysian Small Scale Fishermen towards Climate Change
This study attempts to examine factors that affect local leaders’ perception on the adaptation ability of small scale fishermen towards climate change. This study is quantitative in nature and via multi-stage cluster sam...
Needs and Criteria in Developing Creative Movement Module for Preschool Children
This research is concerned on the development of a module on creative movements for children as a medium in teaching and learning. The development of this module is prior to issues in adapting creative movements among pr...
Integrated Model and Study on the Prominence of Social Entrepreneurship
Social entrepreneurship is an activity with an embedded social purpose, has been on the ascendancy in recent decades. A partial index of this surge is revealed by the increase in the number of nonprofit organizations. Th...