Impact of Rising Interest Rates on HDB Flat Owners on Private Bank Home Loans

The following question stood in the name of Miss Cheryl Chan Wei Ling –

To ask the Minister for National Development (a) what proportion of HDB flat owners with private financial loans may be affected by the rising interest rates; and (b) what is the likelihood of these owners requiring interim housing support from the Government due to foreclosure risk.

Mr Gan Thiam Poh asked the Minister for National Development (a) in view of the rising interest rate environment, what is the financial impact on those who have taken HDB and commercial bank loans to finance their HDB flat purchases; (b) whether the Government will consider assisting these affected groups; and (c) if so, how.

Mr Speaker, the impact of rising interest rates on HDB borrowers would depend on the type of loan packages that they have taken.

For those with housing loans from financial institutions (FIs), about 80% are on mortgage packages that track market interest rates, but with some lag. The remaining 20% are on mortgage packages that move in tandem with market interest rates. The second group of borrowers has seen mortgage repayments rise over the past few months.

For borrowers who have taken housing loans from HDB, their mortgage repayments would not have been affected by rising interest rates, as the HDB concessionary loan rate, which is reviewed quarterly, remains unchanged at 2.6% per annum.

The proportion of non-performing mortgages among HDB flat owners has remained low and stable for housing loans extended by both HDB and FIs.

Credit measures, such the Loan-To-Value ratio (LTV) and Mortgage Servicing Ratio (MSR), have helped to ensure that households borrow prudently from the outset. In view of the increase in interest rates and to further encourage financial prudence in borrowing for home purchases, MAS, MND and HDB recently announced measures to promote continued sustainable conditions in the property market. MAS increased the medium-term interest rate floor used to compute the Total Debt Servicing Ratio (TDSR) and the MSR for property loans by FIs. HDB introduced an interest rate floor to compute eligible loans for housing loans granted by HDB. These measures help to ensure that HDB flat buyers take on loans prudently and are better able to service their loans should interest rates rise further.

Nonetheless, we recognise that some HDB home owners may face financial difficulties as their circumstances change and we encourage such borrowers to reach out for assistance early.

For HDB home owners with housing loans granted by HDB, HDB has various financial assistance measures in place to help them, which include allowing them to reduce or defer their loan instalments for six months; pay their arrears by instalments within a reasonable period; and/or extend their loan tenure to help reduce their monthly instalments.

HDB home owners with housing loans from FIs should also approach their lenders early to explore solutions if they are facing difficulties servicing their loans. MND, HDB, MOM and MAS have worked with FIs to establish a standardised workflow to assist HDB flat owners in distress. This includes working with flat owners on potential loan restructuring solutions, referring them to HDB and social service agencies for assistance and, where foreclosures by banks or FIs are unavoidable, work with flat owners to source for their next accommodation.

The Government will continue to ensure that public housing remains affordable and accessible for all Singaporeans.