There have been improvements to the risk profile of borrowers thanks to the Total Debt Servicing Ratio (TDSR) framework, according to the Monetary Authority of Singapore (MAS) in media reports.
Notably, more people are forking out a down payment of at least 30 percent, resulting in a lower debt quantum. The percentage of borrowers with a loan-to-value (LTV) ratio of more than 70 percent – or people who need a down payment of at least 30 percent – has fallen.
Wong Nai Seng, MAS Assistant Managing Director for policy, risk and surveillance, said in Q2 2010, this segment accounted for 77 percent of all housing loans taken out, but it dropped to 66 percent since 2012.
Moreover, the ratio of potentially over-leveraged borrowers has declined sharply. In 2011, the proportion of borrowers with two or more housing loans was at 30 percent, but it is now at 10 percent.
During the first 10 months of the TDSR, lending also decreased. In this period, an average of $2.3 billion mortgages was issued each month, down from $4 billion in the six months prior to its implementation.
“The TDSR is meant as a structural measure for the long term. It aims to strengthen underwriting standards of lenders and also to encourage financial prudence among borrowers and does that by matching the size of the loan to the borrowers’ payment (capacity) so they don’t take on too much borrowings,” said Wong.
Previous cooling measures, such as the tougher LTV rules, also played a role in improving the risk profile of borrowers.