Singapore’s central bank is relaxing refinancing rules for some homeowners as the economy cools, making it easier for those struggling with their borrowings to roll over their mortgages.
Households which are refinancing their existing mortgages are to be exempted from a 60 percent cap on their total debt-servicing ratio, even if they had observed it when making the purchase, the Monetary Authority of Singapore (MAS) said in a statement on Thursday.
The exemption, which takes effect immediately, only applies to owner-occupiers, MAS said.
The so-called total debt servicing ratio (TDSR) framework was introduced in 2013.
“The MAS’ move to tweak TDSR for refinancing is a timely one so as to ensure the stability of the property market,” Cushman & Wakefield Singapore-based research director Christine Li (李敏雯) said. “In view of the recent weaknesses in the oil and gas and financial services sectors, retrenchment and pay cuts could affect the home owners’ ability to refinance existing home loans.”
Singapore’s home prices and sales have eased since the government began introducing housing curbs in 2009, with some of the strictest measures implemented in 2013, including the TDSR framework, higher stamp duties on residential purchases, and an increase in real-estate taxes.
MAS said that the latest move does not represent an easing of the property cooling measures.
“This is in response to feedback from some borrowers who are unable to refinance their existing property loans owing to the application of the TDSR threshold of 60 percent,” the central bank said. “The refinements being introduced for refinancing of loans will enable borrowers to better manage their existing debts. They do not represent a relaxation of property market cooling measures.”
Singapore is facing economic headwinds due to a regional slowdown led by China, and a slump in oil prices. The nation cut the top end of its growth forecast for this year after GDP expanded 0.3 percent year-on-year in the second quarter, less than previously estimated.
Previously, the mortgage refinancing exemption was only given for owner-occupied homes bought before the introduction of the TDSR framework in June 2013.
New property loans will still be subject to the 60 percent rule, MAS said.
For investment property loans, borrowers who bought the property after the threshold was introduced will also now be able to refinance, provided they commit to a debt reduction plan and fulfill a credit assessment with their financial institution, the central bank said.
Separately, Hong Kong home sales rose to their highest level in at least 14 months as developers sold more new units and sentiment improved due to stabilizing prices.
The number of home sales reached 5,821 last month, with a value of HK$40.6 billion (US$5.24 billion), according to a release on the Hong Kong Land Registry’s Web site yesterday.
That is up from 4,243 units changing hands in July, with a value of HK$29.7 billion.
Demand from buyers has slowly recovered since home sales fell to a 25-year low of 1,807 units in February, spurred by aggressive discounts of up to 18 percent offered by Hong Kong developers. They are also providing mortgages worth as much as 120 percent of a property’s value.
While there has been a pickup in the number of sales, the average size of transactions has fallen as developers sell smaller units compared with a couple of years ago, Bocom International Holdings Co (交銀國際控股) analyst Alfred Lau (劉雅瀚) said. “Developers are focusing more on volumes than margins,” Lau said.
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