Towards Financial Freedom

Banks - Easing Debt Servicing Burden Of Property Buyers

kiasutrader
Publish date: Tue, 11 Feb 2014, 11:19 AM
The Monetary Authority of Singapore (MAS) has broadened the existing exemption  from  the  total  debt  servicing  ratio  (TDSR)  to  ease  the financing  burden  of  borrowers  who  purchased  owner-occupied residential  properties  and/or  investment  properties,  before  the introduction of TDSR. While a welcome relief for some borrowers, these exemptions  are  unlikely  to  stem  the  decline  in  new  property transactions. Maintain NEUTRAL.
Broadens  exemption  from  TSDR  threshold.  In  a  move  to  ease  the burden  of  borrowers  who  face  challenges  refinancing  loans  for  owner-occupied  properties  bought  before  the  introduction  of  the  total  debt servicing ratio (TDSR) rules on 28 June 2013, the Monetary Authority of Singapore  (MAS)  has  decided  to  broaden  the  existing  exemption  from the TDSR threshold of 60%. The exemption is extended to:
i)  Refinancing  of  owner-occupied  property  loans.  A  borrower  who purchased a residential property before the introduction TDSR rules will be exempted as long as he/she occupies the residential property that is being refinanced. The mortgage servicing ratio of 30% of gross monthly salary  will  also  not  apply  to  the  refinancing  of  loans  for  HDB  flats  and executive condominiums that are owner-occupied and purchased before 12  Jan 2013  and  10  Dec  2013,  respectively.  Borrowers  who  purchased residential  properties  before  the  implementation  (28  Aug  2013  for  HDB flats and 6 Oct 2012 for other residential properties) of loan tenure limits of 30 years for HDB flats and 35 years for other residential properties will be allowed to maintain the remaining tenures of their loans, and
ii)  Refinancing  of  investment  property  loans.  The  MAS  will  allow  a transition  period  until  30  June  2017  for  a  borrower  to  refinance  his/her investment  property  loans  above  the  60%  threshold  provided:  i)  the Option to Purchase of the property was granted before 29 June 2013, ii) the borrower commits to a debt reduction plan at the point of refinancing, and iii) the borrower fulfills the financial institution's credit assessment.
To  ease  pressure  on  borrowers,  but  unlikely  to  lift  demand.  The above  exemptions  should  bring  relief  to  borrowers  looking  to  refinance property loans taken pre-TDSR rules. However, without the loosening of cooling  measures  on  new  property  transactions,  we  expect  property-related lending would continue to moderate in the months ahead. Growth in  DBU  housing  loans  has  slowed  to  9.5%  in  2013  (2012:  +15.9%) following the slew of property cooling measures. We maintain NEUTRAL on  the  sector,  with  DBS  Group  (DBS  SP,  BUY,  FV:  SGD19.40)  as  our preferred pick.
Source: OSK
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