Parliamentary Replies
Published Date: 26 May 2020

Reply to Parliamentary Question on debt relief measures




Date: For Parliament Sitting on 26 May 2020

Name and Constituency of Member of Parliament

Mr Kwek Hian Chuan Henry, MP, Nee Soon GRC


Q 3600. To ask the Prime Minister in light of rapidly decreasing interest rates, whether MAS will pro-actively monitor our banks' housing loan rates to ensure that the downward revisions are timely and fair, so as to ease the financial burden of existing borrowers who are impacted by the COVID-19 situation.

Q 3601.To ask the Prime Minister whether MAS will consider proactive measures that will help individuals/businesses to understand credit restructuring and credit counselling programmes since many will be facing financial difficulties due to the COVID-19 situation. 

Answer by Mr Ong Ye Kung, Minister for Education, on behalf of Mr Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS: 

1.     As part of the Government’s response to COVID-19 pandemic, the Monetary Authority of Singapore (MAS) has been closely monitoring market developments and engaging the banks on a comprehensive range of relief measures for borrowers.

2.     MAS does not intervene directly in housing loan pricing as interest rates are determined by the market. But MAS expects housing loan interest rates to be revised downwards in a fair manner where this is consistent with sustained trends in banks’ cost of funding for such loans.

3.     How interest rates on housing loans fluctuate also depends on the loan terms that borrowers had chosen. Currently, about a quarter of borrowers are on housing loans pegged to the Singapore Interbank Offered Rate (SGD SIBOR) or Swap Offered Rate (SOR). These borrowers would already have seen interest rates for their loans come down over the past months, as falling interbank interest rates are passed on directly to these borrowers.

4.     Slightly over half of borrowers have housing loans pegged to board rates or linked to fixed deposit rates. These rates generally change more slowly than SIBOR or SOR. So borrowers are less adversely affected when market interest rates rise quickly, but also will benefit less when market interest rates fall quickly.

5.     The remaining borrowers largely chose to be on fixed interest rates for the first two or three years of their loan. These loans do not adjust to changes in market interest rates, but provide certainty and stability.

6.     Notwithstanding these differences in interest structures, borrowers may refinance their housing loans to take advantage of lower interest rates. The current rates for new housing loans are between 1.4% and 1.8% for the first year, which are lower than the range of 1.8% to 2.3% last year. However, as a matter of practice, banks will charge a fee to borrowers wishing to refinance their housing loans when they are still within the lock-in period. If there are borrowers who have difficulty paying the fee, they can put up an appeal, and I am sure the banks will consider on a case-by-case basis.

7.     MAS also facilitates the refinancing of property loans should borrowers choose to do so, by not subjecting them to the total debt servicing ratio (TDSR), mortgage servicing ratio (MSR) and loan-to-value (LTV) limits for owner-occupied residential properties. As a temporary debt relief measure, MAS has also waived the TDSR and MSR requirements for refinancing loans for investment residential and non-residential properties.

8.     Mr Kwek also asked whether MAS will help individuals and businesses understand credit restructuring and credit counselling programmes.

9.     Our priority has been to prevent borrowers from encountering repayment difficulties. MAS has been working with the financial industry to help individual and SME borrowers with a wide range of credit relief measures, without these impacting the borrower’s credit record. For exampleIndividuals may defer payments on their residential mortgages, renovation loans and student loans, as well as the principal repayment on their non-residential mortgage loans. They may also opt to convert their high-interest unsecured credit card and revolving debts into lower-cost term loans. Individual and SME borrowers who have deferred payments on their loans can also extend their loan tenure such that monthly instalments remain manageable when they resume regular repayments. , individuals will be able to defer payments on their mortgage loans. Likewise, SME borrowers may opt to defer principal repayment on their secured loans.

10.     As at 10 May 2020, close to 90% of the 31,300 applications for mortgage loan payment deferment have been approved. Similarly, more than 90% of the 3,300 applications for SME secured loans deferment have been approved.

11.     MAS has also worked with financial institutions and industry associations to promote awareness of the relief measures, and to help borrowers understand the costs and benefits of each relief measure so that they can make informed decisions.

12.     There will be borrowers who find the relief measures insufficient. They will have to approach their banks to explore possible solutions, including restructuring their debts. They may also approach the Credit Counselling Singapore, or CCS, for debt management advice and counselling. CCS has collaborated with banks to offer the customised debt management plan for such borrowers. To help borrowers on the debt management plans and who are affected by COVID-19, CCS will also assist with restructuring their repayment plans. 

13.     On an ongoing basis, MoneySense, Singapore’s national financial education programme, actively educates the public on debt management options.

14.     MAS will continue to work closely with the financial industry to support individuals and businesses through this crisis, and to educate borrowers on the relief measures available to them.

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