Response to "Easing of car loan curbs sends mixed signals" - The Straits Times, 28 May 2016
2 June 2016
Timely to reset car loan curbs as inflationary pressures have eased
We refer to the letter by Mr Ronnie Lim “Easing of car loan curbs sends mixed signals” (ST, 28 May 2016). When MAS introduced car loan restrictions in 2013, we explained their immediate purpose: to restrain the strong demand for cars and escalating COE premiums at the time, and the consequent pressures on inflation. As explained in Parliament by Minister Lawrence Wong in March 2013, “The introduction of restrictions on motor vehicle loans represents a temporary cyclical response to these developments to dampen demand for motor vehicles, and alleviate overall inflationary pressures in the economy.”
The stringency of the 2013 restrictions reflected these cyclical conditions. COE premiums have since fallen significantly and inflationary pressures have receded. Outstanding motor vehicle loans have also declined substantially. MAS has therefore, in consultation with MOT, reset the car loan restrictions to levels appropriate for the long term. The new rules continue to provide a brake on excessive borrowing, and support both financial prudence and a more car-lite society. We intend to keep these car loan restrictions for the long term.
The move to a car-lite society will, more fundamentally, be underpinned by the vehicle quota system to manage the vehicle population, and continued investments to improve our public transport system, enabling people to meet their transport needs without having to own a car.
Bey Mui Leng (Ms) Director (Corporate Communications) Monetary Authority of Singapore
Christine Yap (Ms) Director (Corporate Communications) Ministry of Transport