Written Answer by Ministry of National Development on loans serviced by HDB homeowners

Jan 14, 2019

Assoc Prof Walter Theseira: To ask the Minister for National Development 

(a) by size of HDB flat, how many HDB lessees are currently servicing

i. HDB loans;
ii. fixed-rate bank loans and
iii. floating-rate bank loans;

(b) what are the average monthly instalments payable, by size of HDB flat and type of loan, in CPF and cash respectively; and

(c) whether the Ministry has studied how sensitive monthly instalments are to the present sustained rise in market interest rates and the results of such studies.

Answer:

As at 31 Dec 2018, 490,440 HDB flat owners were servicing mortgages, of which 320,526 (65%) took their loan from HDB.  Of these households, 68,715 (~22% of 320,526) owned a 3-room or smaller flat, 147,310 (46%) owned a 4-room flat, 84,281 (26%) owned a 5-room flat and the remaining 20,220 (6%) owned an Executive or bigger flat.

The average monthly instalment for flat owners of 3-room and smaller, 4-room, 5-room, and Executive/bigger flats servicing HDB loans was $567, $853, $1,058 and $1,253 respectively. Amongst these flat owners, 224,836 (70% of 320,526) households paid their monthly instalment fully using CPF monies, 44,693 (14%) households paid fully in cash, and 50,997 (16%) households used a combination of cash and CPF monies.  

Of the flat owners who took a loan from HDB, the large majority (292,664 or 91%) took a concessionary loan. The interest rate of concessionary HDB loans is pegged at 0.1% above the CPF Ordinary Account interest rate, which is currently at 2.5% and does not change frequently. This has helped to provide certainty to HDB borrowers on their monthly mortgage repayments. 

At the same time, there were about 169,914 (35% of 490,440) households servicing loans from financial institutions (FIs) for their HDB flats. Of these households, 36,875 (22% of 169,914) owned a 3-room or smaller flat, 73,397 (43%) owned a 4-room flat, 45,381 (27%) owned a 5-room flat, and the remaining 14,261 (8%) owned an Executive or bigger flat.

However, as of September 2018, less than one-third of all outstanding housing loans extended by FIs were pegged to floating market interest rates, down from about 60% in 2016. Many FI borrowers have switched to fixed-rate loan packages, which has reduced their vulnerability to market interest rate increases.

The government has also put in place measures to encourage financial prudence among borrowers that could help to mitigate the impact of rising market interest rates. For instance, loans for the purchase of HDB flats granted by FIs are subject to a maximum loan amount based on the flat’s value and a Mortgage Servicing Ratio (MSR) of 30%, with the latter computed using a medium-term interest rate (currently 3.5%). FIs are also required to provide a Residential Property Loan Fact Sheet when marketing property loans, to help borrowers understand how they will be impacted by higher interest rates. 

In addition, MAS regularly conducts stress tests on households’ mortgage exposures. Most HDB owners’ mortgage payments to FIs are expected to remain manageable under a “severe stress” scenario of both higher interest rates and lower household incomes.