Response to "Loan curbs may hurt home buyers?" - The Straits Times, 11 August 2013
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