Malaysia's Property Loan Stock Swells to About RM1.23 Trillion Even as Demand Cools

Malaysians owe more on property than ever, even as fewer people are applying for new home loans. A report by The Rakyat Post on 12 October 2026, based on banking data, found that property debt reached about RM1.23 trillion in August 2026, equal to around half of all loans in the banking system.

The key figures

Based on the report:

• Outstanding property loans were about RM1.23 trillion in August 2026.
• That is about 50.3% of total banking system loans.
• Property loan applications fell 4.0% year on year to RM58.4 billion.
• Loan approvals fell 13.1% to RM23.8 billion.
• The approval ratio dropped to about 40.8%.

Why debt rises while demand cools

These numbers may seem contradictory, but they reflect different things. Outstanding loans represent the total stock of mortgages taken out over many years. Even with fewer new loans, the total can keep growing as earlier loans are disbursed for projects under construction and as property values in older loans remain on the books.

New applications and approvals, on the other hand, show current demand. A fall in both suggests buyers are more cautious and banks are being more selective.

Key takeaway: a lower approval ratio means more applications are being turned down or withdrawn. Buyers should prepare their finances carefully before applying.

Unsold homes add pressure

The report also noted that unsold completed homes rose to 33,094 units in the second quarter, led by Johor, Selangor and Perak. Combined with weaker approvals, this points to a market where supply in some segments is not matching what buyers can afford or want.

Industry groups have called for measures beyond Budget 2027 to address costs, overhang and stalled projects, as we covered in our report on the property sector's wish list.

Interest rates in the background

Interest rates are another factor. Bank Negara recently said it has room to adjust rates if inflation pressures rise, and markets are pricing in the possibility of a hike. Higher rates would raise repayments on floating-rate home loans, which could make banks and buyers even more cautious.

What it means for Malaysians

For current homeowners and would-be buyers:

1. Check your loan health. If you have a floating-rate mortgage, calculate how a small rate increase would affect your monthly repayment.
2. Prepare before applying. Keep your credit record clean, reduce other debts and have documents ready to improve approval chances.
3. Do not overstretch. A comfortable repayment level leaves room for rate changes and life events.
4. Look at total costs. Include legal fees, maintenance charges and insurance, not just the property price.

For more on household budgeting, our Budget 2027 explainer covers relief measures that may help.

What a lower approval ratio can mean

An approval ratio around 40% means that, by value, fewer than half of the loan applications in the period were approved. Reasons can include stricter bank assessments, applicants with high existing debt, property valuations below purchase prices, or buyers applying to several banks at once. For buyers, this is a reminder to check eligibility carefully and get professional advice on how much they can borrow before committing to a purchase.

What to watch

Watch monthly banking data from Bank Negara for trends in applications, approvals and impaired loans. Any interest rate decision will also have a direct impact on the property market in the coming months.