Singapore introduces new property cooling measures: Maximum loan quantum limits tightened, loan-to-value limit lowered
Singapore introduces new property cooling measures: Maximum loan quantum limits tightened, loan-to-value limit lowered. On Thursday (Sept 29), the government introduced a slew of new property cooling measures aimed at decreasing demand in the face of rising market interest rates.
Lowering maximum loan amounts and implementing a 15-month waiting period for private home buyers purchasing Housing Board resale apartments are among the measures. The maximum loan-to-value (LTV) for HDB loans will be cut from 85% to 80%. The HDB, the Monetary Authority of Singapore (MAS), and the Ministry of National Development (MND) released a joint press announcement just after 11.40 p.m. on Thursday.
According to the agencies, market interest rates have “risen significantly” and are anticipated to rise further in the future, influencing borrowing costs for home purchases. “The government would restrict the maximum loan quantum regulations for housing loans to ensure prudent borrowing and avoid future challenges in servicing house loans,” they claimed. Greater interest rates will be assumed when calculating borrowers’ repayment ability. This will be accomplished through two steps: increasing the medium-term interest rate floor used to calculate the total debt servicing ratio and the mortgage servicing ratio by 0.5%, and implementing a 3% interest rate floor for calculating the qualifying loan amount for HDB-issued loans.
The higher medium-term interest rate floor will apply to real estate loans sanctioned on or after September 30. If there is no purchase option, it will take effect on or after the date of the sale and purchase agreement. According to them, private financial institutions would continue to set actual interest rates on mortgages. The new HDB loan interest rate floor will apply to new applications for a HDB loan eligibility letter received on or after September 30 at midnight.
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