Zero Entry Cost (ZEC) housing loans means bank will absorb the legal fee, stamp duty and valuation fees. However, it can result in an unhealthy price war in the banking industry due to it ate into their profit margins.
There’re few financial institutions (e.g AIA, ING, MBSB and Kuwait Finance House Bhd) that are offering Zero Entry Cost housing loans in the property markets. Those who offering this kind of scheme are actually making the housing loan market more competitive. As we can see, the current interest rates are as low as BLR -2.3% to BLR -2.5%, compared with the previous range of BLR -1.8% to BLR -1.9%. Besides that, the loan approval rate will be lower nowadays due to the implementation of credit-tightening measures. Thus, ZEC housing loans are not profitable especially if the loans are offered at a competitive interest rate.