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Singapore loosens debt limit rules for some home owners


SINGAPORE: Singapore will broaden exemptions from the debt limit for refinancing loans of home owners, its central bank said on Monday, in its first tweak of the policy introduced last June that was aimed at cooling down the property market.
The city-state’s private homes sales in December fell to a five-year low, after the government broadened measures last year to curb speculation that had driven home prices to record highs fuelled by low interest rates.
Under the revised rules, a borrower will be exempted from the 60 percent TDSR (Total Debt Servicing Ratio) threshold in refinancing a residential property, so long as it was purchased before the introduction of TDSR rules and it is owner-occupied, the Monetary Authority of Singapore (MAS) said in a statement.
Previously, the exemption also required that the owner did not own any other property, and had no other outstanding property loan.
The MAS said it had received feedback from borrowers facing challenges refinancing loans for such properties.
“MAS has decided to broaden the existing exemption from the TDSR threshold of 60 percent for such loans to ease the debt servicing burden of these borrowers,” it said.
The MAS announced the TDSR rules last June, limiting a property buyer’s monthly payment at 60 percent of his income.
In the last quarter of 2013, the price index for private residential properties decreased by 0.9 percent from the previous quarter, but still hovered near a record high hit in the third quarter of that year, Urban Redevelopment Authority data showed.
Analysts said the policy change would help a fair number of home owners seeking to refinance their properties, but did not signal a shift in government policy on the property market.
“The revised rules would provide some relief for current home owners who bought their homes before TDSR ruling, and are genuinely seeking re-financing to ease their loan financing burden,” said Alice Tan, head of consultancy and research at Knight Frank. “Yet this exemption is not likely to create a boost in home sales for now, as the TDSR threshold still remains for buyers who bought homes and who are intending to purchase a property after the effective date of TDSR.”
The MAS will also allow borrowers whose loan tenures for their owner-occupied residential properties exceed the current regulatory limits to maintain the remaining tenures of their loans at the point of refinancing, as long as these properties were purchased before implementation of loan tenure limits.
In addition, the central bank will grant a transition period until June 30, 2017, during which a borrower may refinance his investment property loans above the 60 percent limit, if the property was purchased before the introduction of TDSR rules, and the borrower commits a debt reduction plan with the financial institution and fulfills credit assessment.

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