MAS, MND and HDB announce measures to ensure prudent borrowing and moderate demand in property market

28 October 2022

On 29 September 2022, the Monetary Authority of Singapore (“MAS”), the Ministry of National Development (“MND”) and the Housing and Development Board (“HDB”) jointly announced measures to promote sustainable conditions in the property market by ensuring prudent borrowing and moderating demand.

The measures are introduced against the backdrop of rising interest rates which are likely to increase further in the future, thereby affecting borrowing costs for home purchases. To ensure prudent borrowing and avoid future difficulties in servicing home loans, the Government will tighten the maximum loan quantum limits for housing loans as follows:

• The Government will assume higher interest rates when assessing borrowers’ repayment ability via the following two measures:

-- For property loans granted by private financial institutions, MAS will raise by 0.5%-point the medium-term interest rate floor used to compute the Total Debt Servicing Ratio (“TDSR”) and Mortgage Servicing Ratio (“MSR”). This revision reflects higher interest rates expected over the medium term, compared to the period of exceptionally low rates from 2013 to 2021.

This will apply to loans for the purchase of properties where the Option to Purchase (“OTP”) is granted on or after 30 September 2022, or where there is no OTP, the date of the sale and purchase agreement is on or after 30 September 2022. It will also apply to new mortgage equity withdrawal loan applications made on or after 30 September 2022.

Borrowers refinancing owner-occupied property loans will not be affected by this change, while those refinancing other types of property loans will be subject to the prevailing medium-term interest rate that applied when they first took up their loans.

The actual interest rates charged for mortgages will continue to be determined by the private financial institutions.

-- For housing loans granted by HDB, HDB will introduce an interest rate floor of 3% for computing the eligible loan amount.

The interest rate floor will apply to fresh applications for an HDB Loan Eligibility (“HLE”) letter received on or after 30 September 2022, 00:00 hours. There will be no impact to existing HLE applications received by HDB before this time. This will not affect the actual HDB concessionary interest rate, which will remain unchanged at 2.6% p.a..

• The Government will lower the Loan-to-Value (“LTV”) limit for HDB housing loans from 85% to 80%. The lower LTV limit will apply to new flat applications for sales exercises launched and complete resale applications which are received by HDB on or after 30 September 2022.

Reference materials

The press release is available on the MAS website www.mas.gov.sg.