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MAS relaxes TDSR loan curbs for some homeowners

SINGAPORE — Borrowers with more than one property loan are now exempt from meeting the Total Debt Servicing Ratio (TDSR) threshold when refinancing the mortgage of the homes they live in, said the Monetary Authority of Singapore (MAS) yesterday, as part of a wider move to relax loan curbs under the framework.

Monetary Authority of Singapore. TODAY file photo

Monetary Authority of Singapore. TODAY file photo

SINGAPORE — Borrowers with more than one property loan are now exempt from meeting the Total Debt Servicing Ratio (TDSR) threshold when refinancing the mortgage of the homes they live in, said the Monetary Authority of Singapore (MAS) yesterday, as part of a wider move to relax loan curbs under the framework.

The exemption applies only to properties bought before June 29 last year, when the TDSR framework was introduced. The move was taken to help “ease the debt-servicing burden of these borrowers”, the MAS said after receiving feedback from this group of homeowners.

“This is a concession compared to the (previous exemption), which requires that the borrower does not own any other property or have any other outstanding property loan,” said the central bank.

“The TDSR threshold of 60 per cent will continue to apply to the refinancing of all investment property loans … However, the MAS recognises that some borrowers may face challenges in right-sizing their debt obligations in the short term,” it added.

Therefore, these borrowers have been given until June 30, 2017 to refinance their remaining mortgages above the TDSR threshold if they commit to a debt-reduction plan and fulfil a credit assessment by the financial institution. These revisions also apply to properties bought before the TDSR introduction.

The MAS also announced that the Mortgage Servicing Ratio (MSR) will not be applied to the refinancing of loans for Housing and Development Board (HDB) flats and Executive Condominiums (ECs) that are occupied by their owners and purchased before its implementation. The MSR was implemented on Jan 12 last year for HDB flats and Dec 10 for ECs purchased directly from developers.

The revised rules take immediate effect.

Property analysts welcomed the revisions as they thought the original TDSR framework had “unfairly penalised” certain homeowners.

“In principle, the MAS wants everyone to live within their means,” said Mr Colin Tan, Suntec Real Estate Consultants Director of Research and Consultancy. “So, these changes allow people to refinance their property loans to a more favourable package; for example, from floating to fixed rates. But we don’t know how big the number of affected people is.”

Mr Ku Swee Yong, Chief Executive of property agency Century 21, said that while the TDSR was introduced with the intention of encouraging financial prudence, certain guidelines were too stringent, such as requiring financial institutions to use a minimum of 3.5 per cent instead of the prevailing interest rates in their stress tests before approving property loans.

“The MAS probably realised there were enough genuine non-speculative homeowners that were caught in the TDSR rules … (This revision) gives people flexibility to refinance if there are more attractive packages,” he said.

Both Mr Tan and Mr Ku said the impact on the housing market would probably be minimal, but Ms Christine Li, Head of Research and Consultancy at property firm OrangeTee, said the revisions may help to “prevent a sharp price correction in the event that more such homeowners choose to sell their properties due to their inability to refinance”.

“Under the old rules … they could be held hostage by the banks in having to accept whatever re-pricing interest rates they offer. They could be left with few options other than selling their properties, sometimes at a loss,” said Ms Li. LEE YEN NEE

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