The Capped Interest Rate Scheme (CIS) is a mortgage initiative introduced by the Malaysian government to help low to middle-income families afford homeownership. Under this scheme, participating lenders are required to cap the interest rate of the mortgage, making it more affordable for borrowers.

Since its implementation in 1993, the CIS has garnered positive feedback from both lenders and borrowers. Here are some of the benefits of the CIS for mortgage lenders:

1. Increase in homeownership rates

One of the main benefits of the CIS for mortgage lenders is the increase in homeownership rates. The capped interest rate makes it easier for borrowers to afford a mortgage, thus increasing the demand for housing loans. This, in turn, leads to an increase in the number of mortgage applications, providing banks with a steady stream of business.

2. Lower risk of default

By capping the interest rate, the CIS reduces the risk of default for mortgage lenders. This is because borrowers are more likely to make timely payments when the interest rate is affordable. As a result, lenders can expect a steady stream of income from the mortgage, reducing the risk of non-performing loans.

3. Diversification of loan portfolio

Participating in the CIS also allows mortgage lenders to diversify their loan portfolio. With a stable and affordable interest rate, lenders can attract a different set of borrowers who may not have been able to afford a home otherwise. This diversification helps lenders spread out their risk and reduce their exposure to a single type of loan product.

4. Better relationship with regulators

The CIS is a government-backed scheme, and participating lenders are required to adhere to certain guidelines and regulations. By participating in this initiative, lenders can build a better relationship with regulators, showcasing their commitment to helping low to middle-income families achieve the dream of homeownership.

5. Positive image and reputation

Participating in the CIS can also have a positive impact on the image and reputation of mortgage lenders. By offering affordable mortgages, lenders are seen as socially responsible and caring towards the needs of the community. This can improve their brand image and attract more customers in the long run.

6. Access to government subsidies and incentives

Under the CIS, mortgage lenders can also access government subsidies and incentives. This includes tax incentives, which can reduce the overall cost of the mortgage for lenders. Apart from that, lenders can also benefit from government-provided training and resources to improve their services and processes.

In conclusion, the CIS has brought numerous benefits to mortgage lenders, ranging from increased business to better relationships with regulators. By participating in this scheme, lenders are not only fulfilling their social responsibility but also securing their own financial stability. Therefore, it is no surprise that the CIS has received widespread support and continues to play a vital role in promoting homeownership in Malaysia.