Tag Archives: Mortgages

TDSR doing its job, stats show

The impact of the Total Debt Servicing Ratio (TDSR) framework is being felt, with less than 10 percent of existing borrowers having a TDSR of more than 60 percent, reported The Business Times, citing statistics from the Monetary Authority of Singapore (MAS).

In fact, the prevalence of highly leveraged borrowers has declined for new housing loans, said the MAS.

“Almost all new housing loans are below the 60 percent TDSR threshold, with a significant proportion of new borrowers having TDSRs of less than 40 percent.”

Moreover, borrowers are now taking out fewer mortgages. Borrowers with more than one loan accounted for 20 percent of all new housing loans in Q3 2015, down from the 30 percent seen in 2011.

With this, the MAS is encouraging households to prepay their home loans in order to avoid monthly repayments and higher interest costs.

Banks also noticed that households have improved the risk profile of their home loans by paring down their mortgages.

Tok Geok Peng, DBS Bank’s Executive Director of Secured Lending, believes that the property cooling measures have helped homeowners to downsize their loan commitment via debt consolidation, capital repayment and other means.

Sherry Leong, Head of Secured Finance Solutions at Citibank Singapore, added: “We do not foresee any impact to (borrowers) with respect to the transition period, which should be sufficient for them to make any changes to their refinancing arrangement if required.”

The MAS revealed that the purpose of the three-year transition period is to encourage highly leveraged borrowers to “right-size their loans as early as possible”.

In February 2014, the central bank introduced a concession which broadened the exemption of the TDSR to include homeowners who breached the 60 percent limit but were hoping to refinance the loan on the property that they live in.

As for investment homes, the MAS allows a grace period until 30 June 2017 for refinancing, should the borrower agree to pay down a portion (usually at least three percent) of the outstanding loan.


Waning property demand ‘could damage economy’

Cooling measures may depress consumer sentiments excessively.

DEVELOPERS are keeping close tabs on the residential market, as waning property demand could pose a danger to the wider economy.

“The fear is that when consumer sentiment declines too much as a result of measures designed to cool the market, there could be a broader impact on the economy,” said Mr Chia Boon Kuah, president of the Real Estate Developers’ Association of Singapore (Redas).

He was speaking yesterday at the annual Mid-Autumn Festival lunch at the Grand Copthorne Waterfront Hotel.

Mr Desmond Lee, Minister of State for National Development, and City Developments chief Kwek Leng Beng also attended.

Mr Chia called for more dialogue between developers and the Government as the industry goes through “challenging times”.

He pointed to the swelling stock of unsold units sitting on developers’ balance sheets. Banks, which give out loans to developers and home buyers, are increasingly concerned, too.

A recent report from investment bank UBS said household balance sheets have been underpinned by high home prices and debt, and that a 10 per cent to 15 per cent dip in prices would badly affect consumer spending.

“This shows that even when a small segment of mortgages sours, it can have a negative impact on the broader market,” Mr Chia said.

So far, in the first half of the year, prices of private condominiums have eased 2.3 per cent while prices of Housing Board resale flats are down 3 per cent, Urban Redevelopment Authority figures showed.

To prevent a destabilising economic slowdown, said Mr Chia, Redas “stands ready” for more collaboration with the authorities.

However, Mr Donald Han, managing director of Chestertons, noted that developers may be hit by thinning margins, but most have built up strong balance sheets during the bull run in the property market over the past three years. Banks are also in a much stronger state now, compared with the period of the global financial crisis.

Mr Alan Cheong, research head at Savills Singapore, said that while developers are concerned about how a slowing property market could affect the economy, the Government’s primary concern is to ensure financial prudence among borrowers. But this seems to be at the expense of the growth in deposits, even as consumer loan levels have eased.

In July, deposits growth rose by just 0.1 per cent, down from 10 per cent a year ago – before the total debt servicing ratio kicked in, said Mr Cheong. In comparison, consumer loans grew at about 10.5 per cent in July, down from about 20 per cent a year earlier.

“The measures could have been calibrated at too high a level,” noted Mr Cheong. “Singaporeans are put off by the total debt servicing ratio and foreigners are not bringing in the money because of the additional buyer’s stamp duty. Money is flowing out.”