26 August 2014

The Editor
BT Editorial & Opinion

Dear Editor,

Mr Ho Swee Huat suggested that borrowers who had purchased their properties before the introduction of the Total Debt Servicing Ratio (TDSR) framework should not be subject to the TDSR threshold of 60 percent when they refinance their housing loans (“Make rules on refinancing mortgages more flexible”, 12 August 2014). We thank Mr Ho for the opportunity to clarify our rules.

The TDSR framework applies to the refinancing of existing property loans where the date of the refinancing is on or after 29 June 2013. This is to encourage borrowers to right-size their loans and thereby reduce their vulnerability to adverse economic conditions or changes in interest rates.

We recognise that some borrowers may face challenges in right-sizing their debt obligations in the short-term. Therefore, MAS does not require banks to apply the 60 percent TDSR threshold at refinancing if the borrower bought his residential property before the introduction of TDSR rules and occupies the property.

In addition, banks need not apply the 60 percent threshold for an investment property bought before the introduction of the TDSR framework if the borrower applies for refinancing before 30 June 2017 and commits to a debt reduction plan.

The above exemptions will help borrowers to refinance their property loans and lower their borrowing costs. 

Banks may, however, apply more stringent terms and conditions, depending on their credit assessment of the borrower.

The current low interest rate environment will not persist indefinitely.  When interest rates rise, borrowers will face higher mortgage repayments.  We encourage borrowers seeking to refinance their housing loans to exercise prudence and review their debt commitments with a view to lowering their overall debt burden.

Bey Mui Leng
Director (Communications)
Monetary Authority of Singapore