Reply to Parliamentary Question on Debt Management Assistance
QUESTION NO 2892
NOTICE PAPER 1135 OF 2022
FOR ORAL ANSWER
Date: For Parliament Sitting on 9 May 2022
Name and Constituency of Member of Parliament
Mr Saktiandi Supaat, MP, Bishan-Toa Payoh GRC
To ask the Prime Minister in light of rising interest rates (a) whether there has been an increasing trend over the past year in the number of financially-distressed consumers who have sought debt management assistance; (b) whether the Government intends to introduce measures to afford temporary respite to consumers and businesses who encounter short-term liquidity issues; and (c) what are some foreseeable knock-on impacts.
Answer by Mr Alvin Tan, Minister of State, Ministry of Trade and Industry and Ministry of Culture, Community and Youth, and Board member of MAS, on behalf of Mr Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS:
1. The number of financially-distressed consumers who have sought assistance from banks is not high and has been decreasing over the past year. Broader indicators also suggest that the household and corporate debt situation in Singapore remains resilient on the whole.
- The proportion of non-performing mortgages has remained low at less than 1% last year. MAS’ stress test suggests that the median household’s mortgage servicing ratio should remain manageable even under scenarios of significantly higher interest rates or lower incomes.
- The proportion of non-performing corporate loans has also remained low, at 2.6%. Here too, MAS’ stress test suggests that debt servicing of Singapore-listed firms is likely to remain manageable as interest rates rise, with most firms having sufficient earnings to cover their interest expenses and cash reserves to provide buffers.
2. Industry-wide credit relief measures have been gradually withdrawn, in line with the broadening of the economic recovery and the steady decline in the number of applications for assistance. These measures, introduced in March 2020, were meant to provide short-term relief and support to individuals and SMEs, as stringent public health measures led to temporary cashflow difficulties. Conversely, recent market driven interest rate increases have been accompanied by continuing income growth, which mitigates their impact on the debt servicing ability of most borrowers. Indeed, the debt relief schemes introduced during the pandemic are not meant to insulate borrowers from the normalisation of interest rates.
3. However, a small segment of households, especially those with higher leverages, could be more constrained by higher interest rates. They should approach their lenders early to explore possible loan refinancing and repayment solutions. For financially distressed HDB homeowners, MAS has worked with MND, HDB, MOM and financial institutions to establish standardised interventions when late repayments occur. These include potential loan restructuring solutions, early referrals to appropriate social service agencies and in certain limited cases, helping them obtain alternative HDB accommodation where foreclosures are unavoidable. Likewise, companies with low net profit margins should approach their lenders early to work out suitable loan repayment plans.
4. More broadly, everyone should exercise caution in their new borrowings. Households and businesses should plan for further interest rate increases, and be sure of their ability to service their loans before making additional long-term financial commitments.