LOANS TO HDB FLAT BUYERS
liberalisation of HDB mortgage market in January 2003,
HDB has stopped providing marketrate loans to HDB flat
buyers. Instead, flat buyers who are not eligible for
HDB concessionary loans would have to obtain loans from
the banks to finance their flat purchase at commercial
rates and terms. Existing HDB mortgagors can continue
their existing mortgages provided by HDB, or refinance
their loans with banks if they choose to. Bank origination
of HDB mortgage loans has grown steadily since the liberalisation,
with many banks offering competitive mortgage packages.
New HDB loans offered by banks reached S$2.9 billion by
the end of 2003 while refinancing of the existing stock
of HDB market-rate loans totalled S$1.6 billion1.
initial crest of refinancing activity from March to May,
volume and value of refinancing declined from June onwards,
down to less than S$50 million in December2
(See Chart 17). The total refinancing amount of S$1.6
billion represented 11.7% of HDBs stock of market-rate
loans as at end-2002. The modest amount of refinancing
with banks of the existing stock of HDB loans could be
because of borrowers perceptions that banks might
be less forbearing with late payments; or a required minimum
refinancing threshold with banks.
Nevertheless, the S$4.5 billion of total bank-originated
loans has been an important part of the banks overall
loan growth, accounting for 65.5% of the net increase
of S$6.9 billion in the total stock of housing loans in
2003. Excluding the bank-originated HDB loan component,
mortgage loan growth at end-2003 would have been 5.1%,
instead of 14.9%.
Normalising the distribution of refinanced market-rate
loans by room type and by year of purchase over the distribution
in HDBs stock of market-rate loans, refinanced HDB
loans were mostly for larger flats, particularly the four-room
and five-room (See Chart 18). Larger flats were more likely
to be refinanced in view of the higher loan quantum. In
terms of the year of purchase, HDB properties purchased
in recent years, and those purchased during the peak of
the property price cycle in 1996 and 1997 were more likely
to be refinanced (see Chart 19). The underlying factor
could simply be the larger loan quantum and hence larger
savings in interest payment due to the lower initial interest
rates offered by the banks.
the liberalisation of the HDB mortgage loan market in
2003, HDBs stock of market-rate loans fell from
S$13.8 billion at end-2002 to S$11.7 billion at end-20033.
Concessionary-rate loans also witnessed a decline from
S$50.4 billion to S$49 billion.
In this write-up, housing loans data include small amounts
originating from finance companies.
2 The refinanced loans include negligible amounts refinanced
from HDB concessionary-rate loans.
3 Although HDB has officially stopped providing new market-rate
loans, some S$551.5 million was extended due to new or
resale transactions booked before 1 January 2003 but completed
only after 1 January 2003.