With Tighter Housing Loans, Private Home Owners Need to Wait for 15 Months to Buy HDB Flats

Recent news updates reveal that the Singapore government will now restrict the maximum amount that new homeowners can borrow, so that the borrowers may find it easier to service these loans.

The market scenarios show a consistent rise in the interest rates after cooling measures and it is likely to increase further. Therefore, authorities are now taking several essential measures to ensure that home buyers can borrow within the limit and it will further help to moderate demand for new homes in the market.

The property loans issued by the private organizations in the area may increase the average interest rate that is otherwise used to estimate the mortgage servicing ratio and total debt servicing ratio by approximately 0.5% point. The first measurement out of these is applicable to loans taken for HDB purchase and it refers to the entire portion that is dedicated to repaying property loans; whereas the second term defines the portion of the gross monthly income of the borrower that may be utilized to repay all debt obligations on monthly basis.

It clearly means that MAS prefer to consider some stricter measures to estimate the ability of the borrower to repay before they are qualified to take more loans. This condition will be effective for loans utilized for the purchase of properties with a sale or purchase agreement granted after or on September 30.

Note that the actual interest rate estimates for the mortgage in Singapore in the future also will be determined with the involvement of private financial organizations. The institutions will also use stricter criteria to assess the eligibility of HDB flat buyers so that their loan terms can be maintained accordingly. After 30th September, all financial institutions will introduce a 3% interest rate floor for identifying the eligible loan amount.

It clearly means that interest rates that will be used to estimate eligible loan amounts for borrowers interested to purchase HDB flats will be at 3% per annum. This new 3% interest rate floor is also to be applied to fresh applicants whose applications are received after 30th September. However, no such obligation will be applied to the applications received before 30th September, 12 am.

The interest rates for HDB housing loans are expected to stay the same from Oct 1 to Dec 31 with a 2.6% estimate per annum. Meanwhile, the loan-to-value limit will also be lowered from 85% to 80% for HDB housing loans. It clearly means that the borrowers will be allowed to borrow almost up to 80% of the assessed value of the flat.

The moderate HDB resale market demands, with a wait-out period of 15 months for former and current owners of private condos, will be applicable to buyers after 30th September. The government is taking such measures to control the demands while making sure that the flats stay in the affordable range, at least for first-time buyers. These measures will be further updated as per market conditions.




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