15 August 2013

The Editor
ST Forum

Dear Editor,
Mr Cheok Chin Yam asked why the total debt servicing ratio (TDSR) threshold of 60 per cent applies to re-financing of housing loans (“Loan curbs may hurt home buyers”, The Straits Times, 11 August 2013).

While there is no increase in loan amount when a housing loan is re-financed, the Monetary Authority of Singapore has applied the 60 per cent TDSR threshold on re-financing of housing loans to encourage borrowers who have over-leveraged on past property purchases for investment purposes to right-size their loans at the point of re-financing. This pre-emptive move decreases the possibility of such borrowers encountering difficulties in servicing their housing loans should interest rates rise, property prices fall, or economic conditions change.

A borrower looking to re-finance his housing loan may be exempted from the TDSR threshold of 60 per cent if he meets certain conditions. These are: the option to purchase the residential property was granted before 29 June 2013; the borrower owns only one property which he occupies; and, he does not have any other outstanding property-related loan.

Angelina Fernandez
Director (Communications)
Monetary Authority of Singapore