Singapore introduces property cooling measures, with stricter borrowing criteria and tighter limits for HDB loans

SINGAPORE: The Government unveiled a slew of property cooling measures on Thursday (Sep 29), aimed at moderating demand and ensuring prudent borrowing amid rising interest rates.

The measures, which come into effect from Sep 30, include tightening the maximum loan quantum limits. For HDB loans, the loan-to-value (LTV) limit has been lowered from 85 per cent to 80 per cent.

To moderate demand in the HDB resale market, there is now a 15-month wait-out period for private home owners buying HDB resale flats.

“It is a temporary measure which will be reviewed in future depending on overall market conditions and housing demand,” said HDB, the Monetary Authority of Singapore (MAS) and the Ministry of National Development (MND) in a joint press release issued slightly after 11.40pm on Thursday.

LOAN LIMITS

The authorities noted that market interest rates have risen significantly and are likely to increase further in the future, affecting borrowing costs for home purchases.

“To ensure prudent borrowing and avoid future difficulties in servicing home loans, the Government will tighten the maximum loan quantum limits for housing loans,” they said.

For property loans from private financial institutions, the medium-term interest rate floor – which is used to compute the total debt servicing ratio (TDSR) and the mortgage servicing ratio (MSR) – has been raised by 0.5 per cent.

TDSR refers to the portion of a borrower’s gross monthly income that goes towards repaying the monthly debt obligations – including the loan being applied for – while MSR is applicable to loans for HDB flats.

By raising the medium-term interest rate floor, authorities are tightening the criteria to assess a borrower’s ability to repay the loan. 

This will apply to property loans where the option to purchase (OTP) is granted on or after Sep 30. If there is no option to purchase, it will apply when the date of sale and purchase agreement is on or after that date.

The actual interest rates charged for mortgages will continue to be determined by the private financial institutions.