Certain limits for deferred payments on mortgages and consumer loans will be waived to help borrowers tide over the economic slump.
The Monetary Authority of Singapore (MAS) clarified yesterday that the total debt servicing ratio (TDSR) will not apply to deferment of mortgage repayments for residential, commercial, or industrial properties, refinancing of owner-occupied residential mortgages, and unsecured credit facilities such as credit cards and personal loans.
Mortgage equity withdrawal loans (MWLs) will also not be subjected to TDSR, if the loan-to-value (LTV) ratio does not exceed 50 per cent.
TDSR caps the amount buyers can borrow for a property loan.
Typically, borrowers’ monthly repayment for all debts must not exceed 60 per cent of their monthly income. This includes mortgages, credit card bills, car loans and personal loans.
LTV refers to the loan amount as a percentage of the property’s value.
MAS said borrowers will be exempt from TDSR limitations when they apply to defer either their principal payment or both principal and interest payments for their home loans.
Interest will accrue only on the deferred principal amount.
This relief applies to home loans and MWLs, including those under debt reduction plans, and extends to both owner-occupied (Housing Board and private) and investment properties.
The loan deferment measures were announced by MAS last week as part of an industry-wide package aimed at heading off a wave of delinquencies and bankruptcies amid the coronavirus-induced economic downturn.
SUPPORT ON BROADER SCALE
The Government and MAS are offering support at a broader scale. So I don’t think any more specific support is likely for the property market at this time.
MR DESMOND SIM, South-east Asia head of research at CBRE.
MAS said the clarification was in response to queries from the public and media on its guidelines for deferment of secured loans and mortgage payments, and will help individuals and businesses explore options to meet their cash flow needs.
Property consultants believe MAS’ latest statement has helped remove any doubts about the relief package announced last week.
Mr Desmond Sim, South-east Asia head of research at CBRE, said: “MAS and banks are offering a helping hand to those who may find it hard to repay their debts in these difficult times.”
Borrowers will have to apply for this loan relief, and it does not change the overall framework that ensures prudent lending and borrowing in the property market, noted Mr Sim.
“The Government and MAS are offering support at a broader scale. So I don’t think any more specific support is likely for the property market at this time,” he said.
In its statement yesterday, MAS said payment deferments to individuals with commercial or industrial property loans are also not subject to TDSR.
TDSR and LTV limit relief for loan refinancing of owner-occupied residential properties will help borrowers with fixed-rate mortgage packages that are out of the lock-in period, MAS said.
It also clarified that since March 2017, borrowers who take up MWLs secured on their existing private residential or non-residential properties have not been subject to TDSR, if the LTV ratio does not exceed 50 per cent.
TDSR requirements will also not apply to unsecured credit facilities, such as personal loans and credit cards.
Minimum income requirements for unsecured credit facilities, however, remain, as does the industry-wide borrowing limit, placed to promote financial prudence and discourage excessive debt accumulation.
MAS also clarified that small and medium-sized enterprises (SMEs) are not subject to TDSR when they apply for payment deferments on their secured property loans as part of the financial industry’s relief package for SMEs announced last week.
To facilitate the provision of credit to businesses, MAS’ current rules allow them to take up MWLs secured on residential or non-residential properties without being subject to TDSR and LTV limits.
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