MAS Specifies Guideline for Cash Rebate Schemes Offered by Banks & Financial Institutions
Singapore, 30 December 2004...The Monetary Authority of Singapore (MAS) announced that it will not allow banks and financial institutions granting housing loans to disburse cash rebates of any amount within a year from the date the borrower pays up the cash down payment in full. MAS considers such rebates as assisting the borrower to meet the cash down payment required under MAS' Notices on Housing Loans. MAS reminds all financial institutions not to offer any scheme that has the effect of assisting the borrower to meet the cash down payment in a property purchase transaction.
2 MAS' Notices on Housing Loans restrict the amounts of housing loans banks and financial institutions can extend to 80% of the valuation or purchase price of a property, whichever is lower. Of the 20% balance, up to 10% may be met by CPF funds1. The borrower must pay the remainder with his own cash. The objectives of this policy are to ensure financial institutions granting housing loans have a prudent buffer against declines in property prices and to curb excessive speculation in the property market.
3 MAS is aware that banks and financial institutions have been offering cash rebates under their housing loan schemes. While rebates that were small relative to the cash down payment required were not a matter of concern, it has come to our attention that rebate amounts have progressively increased. To preserve the policy objectives of the housing loan rules and to ensure a clear standard for banks and financial institutions, MAS now requires a one-year lapse from the date the cash down payment is fully paid to the date the rebate is disbursed.
4 This guideline will apply to all loan applications received by banks and financial institutions from 6 January 2005, where the aggregate of the cash rebate together with the total quantum of credit facilities obtained from financial institutions or the property seller for the purchase of the property exceeds the maximum amount of financing permitted under MAS' Notices on Housing Loans.
1 For HDB flat purchases, up to 18% may be met out of CPF funds. This amount will be revised to 16% from 1 Jan 2005