Written answer by Ministry of National Development on first-time buyers no longer able to purchase new HDB flats under new loan-to-value limit and other parameters in recent property cooling measures

Nov 8, 2022

Mr Leong Mun Wai: To ask the Minister for National Development in view of the new measures to cool the property market, what is the estimated number of first-time HDB flat buyers in 2022 who were able to purchase a flat under the previous stress test rate and Loan-to-Value limit but who will no longer be able to do so under the new measures.

Answer:

In September 2022, the Government introduced an interest rate floor of 3% per annum for HDB to compute the eligible housing loan amount for flat buyers taking a HDB loan, and lowered the LTV limit for HDB housing loans from 85% to 80%. These two measures are implemented to protect Singaporeans by encouraging prudent borrowing amidst the rising interest rate environment. 

2        Flat buyers’ housing budget and ability to purchase a flat depends on various factors, such as their eligibility for CPF housing grants and their CPF and cash savings, and not just the maximum loan amount they are eligible for.

3        Most flat buyers will not be affected by the introduction of the interest rate floor as they do not take up the maximum housing loan amount. As an illustration, about 8 in 10 flat buyers in 2021 would not have been affected by the change in the interest rate floor and lower LTV limit. In addition, first-time buyers, especially lower income households, will generally be less affected by the lower LTV limit. First-timer flat buyers can enjoy the Enhanced CPF Housing Grant of up to $80,000, in addition to the generous subsidies in the new flat price, or total grants of up to $160,000 if they choose to buy a resale flat. They can use the grants, as well as their CPF and cash savings, to pay for their flat purchase, before taking up a housing loan.

4        These measures are necessary as property loans are long-term commitments and often a household’s largest liability. The higher floor rates and lower LTV limit ensure that today’s borrowers take loans that reflect the likelihood of rising interest rates and avoid overstretching themselves.