Parliamentary Replies
Published Date: 05 July 2022

Reply to Parliamentary Question on the adequacy of the prevailing total debt servicing ratio to prevent and minimise systemic risk to financial institutions and borrowers




Date: For Parliament Sitting on 5 July 2022

Name and Constituency of Member of Parliament

Mr Gan Thiam Poh, MP, Ang Mo Kio GRC


To ask the Prime Minister in view of rising interest rates and the current inflationary environment, whether the prevailing total debt servicing ratio is sufficient to prevent and minimise systemic risk to both financial institutions and borrowers.

Answer by Mr Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS:

1. The total debt servicing ratio (TDSR) is part of a suite of measures MAS has put in place over the years to encourage prudent borrowing and lending on residential property purchases. The maximum TDSR was lowered to 55% on 16 December 2021.

2. A key feature of TDSR is that it builds in a buffer against rising interest rates, such as what is occurring now. To calculate mortgage obligations, the TDSR is computed using an interest rate which is the higher of 3.5% or the prevailing market rate to calculate mortgage obligations. 

3. The household debt situation in Singapore remains healthy, with the median TDSR at 43% among new loans issued over the past year, compared to the regulatory limit of 55%. As of Q1 2022, the median loan to value ratio for the outstanding stock of mortgages is less than 50%, which means that in most cases, property prices would have to fall significantly for lenders to realise losses. The credit profile of mortgages is also healthy, with the proportion of delinquent mortgages at less than 1%. 

4. MAS has robust regulatory and supervisory frameworks to minimise systemic risk to FIs. For instance, MAS subjects all major banks to rigorous stress testing to assess any vulnerabilities in their portfolios. 

5. MAS urges households to exercise caution in their new borrowings. They should plan for further interest rate increases, and be sure of their ability to service their loans before making additional long-term financial commitments.