Monday, October 08, 2012

Govt tightens housing loan rules

The Monetary Authority of Singapore (MAS) has capped the tenure for all new residential property loans at 35 years and imposed strict loan-to-value (LTV) limits for loans exceeding 30 years.


In effect since 6 October, the new rules apply to all home loans for HDB flats and private properties. The move is in line with the government’s aim to ensure long-term stability and prevent a price bubble in the property market.


The rules also apply to refinances as well as loans taken out by individual and non-individual borrowers. MAS has also lowered the LTV ratio on new home loans for individual borrowers whose tenures surpass 30 years, or extend beyond the retirement age of 65 years.


Under such circumstances, the maximum LTV ratio for an individual borrower with one or more outstanding loans is 40 percent; while for an individual borrower with no outstanding loan, it stands at 60 percent.


In addition, MAS slashed the LTV ratio for loans to non-individual borrowers from 50 to 40 percent.


Meanwhile, the Real Estate Developers’ Association of Singapore (REDAS) said: “Based on past experience, not many buyers take long tenure loans. REDAS is of the view that the new cap limit will not have significant impact on the property market.”


Finance Minister and MAS Chairman Tharman Shanmugaratnam said: “Monetary conditions worldwide are far from normal. QE3 and low interest rates have made credit easy, but this will eventually change.”


“We are taking this step now to require more prudent lending, and will continue to watch the property market carefully. We will do what it takes to cool the market, and avoid a bubble that will eventually hurt borrowers and destabilise our financial system,” he added.


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