The government has revised the TDSR rules to enable borrowers to better manage their existing debts.
UPDATED: The Monetary Authority of Singapore (MAS) announced on Thursday (1 September) that refinancing rules under the Total Debt Servicing Ratio (TDSR) framework will be tweaked to enable borrowers to better manage their existing debts.
Under the new rules which take immediate effect, borrowers who bought properties for their own stay after the introduction of the TDSR on 28 June 2013 will no longer be limited by the TDSR threshold of 60 percent or Mortgage Servicing Ratio (MSR) limit of 30 percent at the time of refinancing.
Previously, only owner-occupied properties bought before the implementation of the TDSR were exempted from the TDSR framework.
At the same time, the MAS will allow borrowers to refinance their investment property loans above the TDSR threshold, regardless of when the properties were purchased, but two conditions must be met:
1) Borrowers must commit to a debt reduction plan with their financial institution to repay at least three percent of the outstanding balance over a period of not more than three years; and
2) Fulfil the financial institution’s credit assessment.
In a statement, the MAS said refinements to the rules were made in response to feedback from some borrowers who were unable to refinance their existing property loans due to the TDSR threshold.
MAS Deputy Managing Director, Ong Chong Tee, said: “The TDSR is a structural measure to encourage prudent borrowing by households. The adjustments announced today will help borrowers to refinance their existing property loans at lower interest rates and better manage their debt obligations over time.”
The MAS added that this does not represent a relaxation of the property cooling measures, and the TDSR framework will still apply to new property loans.
Meanwhile, analysts have welcomed the latest revisions to the TDSR, which will help ensure a stable property market.
“In view of the recent weaknesses in the oil and gas and financial services sectors, retrenchment and pay cuts could affect the homeowners’ ability to refinance existing home loans. While the mortgage rates are still low, the inability to refinance under the old TDSR rules could result in some foreclosures where homeowners are forced to sell their properties in a down market,” said Christine Li, Director of Research at Cushman & Wakefield.
“There is still a need to put in place the TDSR for new loans because of the persistent low interest rate environment and high liquidity in the market. The restrictions could help prospective homeowners to be financially prudent when buying properties,” she added.
To read the MAS’ full statement, go to: bit.ly/2bLEawe
Romesh Navaratnarajah, Senior Editor at PropertyGuru, wrote this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
