As we prepare for the 14th Parliament to be sworn in following this week’s General Elections, the newly elected Members of Parliament will be expected to take the lead in the task of keeping Singapore going during the COVID-19 pandemic. Will mortgages and housing loan rates play a role in the discourse? Let’s take a quick look back at some of the discussion in the 13th Parliament this year for a clue.
Deferring HDB housing loans… interest free?
On 6 April 2020, as part of the response to the additional support measures in response to the COVID-19 pandemic, MP for Sembawang, Dr. Lim Wee Kiak had three suggestions for the Government during these unprecedented times.
One of the suggestions was to defer HDB loan repayments, interest-free, for several months!
A video of his 7-minute speech can be found here: https://www.channelnewsasia.com/news/parliament/videos/april/solidarity-budget-lim-wee-kiak-on-additional-support-measures-in-12614080?t=270&autoplay=1&view=embed
“…one of the major concerns of stopping CPF contributions is the payment of the HDB housing loans, which many depends on.
“Just like the recent announcements for deferment of housing loans under MAS and the banks, and the announcement in the Budget regarding deferment of study loans repayments, can HDB consider deferring all HDB mortgages repayment for the next three to six months?
“In addition, I hope this deferment can be interest free so that HDB mortgagees’ loans repayment period need not be lengthened too much.”
Maybe the 14th Parliament can look into this recommendation?
Can MAS monitor banks’ housing loan rates?
On 26 May 2020, questions were posed by MP for Nee Soon GRC, Mr Henry Kwek, regarding MAS’ role in engaging the banks on relief measures. His questions were answered by Mr Ong Ye Kung, Minister for Education, on behalf of Mr Tharman, Senior Minister and Minister in charge of MAS.
You can find the video of his answer here: https://www.channelnewsasia.com/news/parliament/videos/may/ong-ye-kung-on-banks-housing-loan-interest-rates-12770132
“As part of the Government’s response to COVID-19 pandemic, the Monetary Authority of Singapore (MAS) has been closely monitoring market developments and engaging the banks on a comprehensive range of relief measures for borrowers.
“MAS does not intervene directly in housing loan pricing as interest rates are determined by the market. But MAS expects housing loan interest rates to be revised downwards in a fair manner where this is consistent with sustained trends in banks’ cost of funding for such loans.
“How interest rates on housing loans fluctuate also depends on the loan terms that borrowers had chosen. Currently, about a quarter of borrowers are on housing loans pegged to the Singapore Interbank Offered Rate (SIBOR) or Swap Offered Rate (SOR). These borrowers would already have seen interest rates for their loans come down over the past months, as falling interbank interest rates are passed on directly to these borrowers.
“Slightly over half of borrowers have housing loans pegged to board rates or linked to fixed deposit rates. These rates generally change more slowly than SIBOR or SOR. So, borrowers are less adversely affected when market interest rates rise quickly, but also will benefit less when market interest rates fall quickly.
“The remaining borrowers largely chose to be on fixed interest rates for the first two or three years of their loan. These loans do not adjust to changes in market interest rates, but provide certainty and stability.”
These were interesting statistics about how popular the different kind of home loan packages are! It is notable that over half of borrowers are on board rates or fixed deposit-linked rates, while the remaining are on SIBOR rates or fixed rate home loans.
Will the 14th Parliament have a more direct role in monitoring and supporting the financial industry? That remains to be seen.
Allow cash out refinancing for HDB flats?
On 5 June 2020, in response to the Government’s plans in our continuing fight against COVID-19 pandemic, the MP for Bukit Batok, Mr Murali Pillai provided three points, including a recommendation to provide more credit and cash flow assistance to middle income families.
You can catch the video here: https://www.channelnewsasia.com/news/parliament/videos/june/murali-pillai-on-fortitude-budget-12808294
“Cash strapped middle income families may be living in HDB or private properties. For these asset-rich, cash-poor families, I wonder if the Government could consider nudging the financial institutions to provide hassle-free, low-interest home equity loan facilities secured by either (a) refinancing of the original mortgage facilities if the original mortgagee is a bank; or (b) by a second mortgage on their homes.
“To my understanding, such options are not currently available for HDB flats. Traditionally, financial institutions are chary about being second mortgagees as, priority-wise, they rank below CPF and the first mortgagee. Also, the processing time can be long. The administration costs in terms of getting valuation and to draw up legal paperwork can be significant too.
“I appreciate that this measure has to be carefully studied for its social impact because if families default on their obligations, the banks may have to foreclose on their homes. However, I think that this issue may be addressed by proper analysis and implementing safeguards on the part of banks.”
This is a truly pertinent issue that has been on the minds of many who have reached out to us at Mortgage Master, looking for ways to access the cash value of their properties. We had to disappoint many who are HDB homeowners are therefore ineligible for cash out refinancing.
Should the 14th Parliament allow HDB homeowners some leeway to obtain cash upfront from their properties, it will definitely make a huge difference during these uncertain times.
The 14th Parliament will have a heavy burden of responsibility to help Singaporeans during COVID-19
Addressing these suggestions from the members of the 13th Parliament could go a long way to assisting homeowners, especially those in HDB flats, and ease their financial concerns as a result of the economic slowdown due to the pandemic.
Personally, Mr Murali’s suggestion to study the possibility of cash out refinancing for HDB homeowners is one that would be of most value during this period. It does not need to be a permanent change to the policy, but even temporary benefits to homeowners, especially those who are asset-rich but cash-poor would go a long way.