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HDB Introduces Property Cooling Measures Including Lowering Loan-To-Value Limit By 5%

HDB Introduces Property Cooling Measures To Moderate Demand Amid Rising Market Interest Rates

Homes in Singapore exchanging hands for exorbitant prices have been all over the news recently, signalling the rise in property market rates. Aware of the growing trend, the Housing & Development Board (HDB) introduced a slew of property cooling measures on Thursday (29 Sep) to moderate demand.

Among them is increasing the wait-out period for private home owners who sell their homes and wish to buy resale flats.

HDB will also assume higher interest rates when assessing borrowers’ repayment ability.

HDB, MND & MAS introduce property cooling measures on 29 Sep

In a joint press release with the Monetary Authority of Singapore (MAS) and the Ministry of National Development (MND) yesterday (29 Sep), HDB announced that they will be implementing new rules in light of the significant rise in market interest rates.

Projecting a further increase that could affect borrowing costs of home purchases, these measures will hopefully ease housing demands and keep prices affordable.

Firstly, the authorities will assume higher interest rates when assessing borrowers’ repayment ability. They will do this via two methods:

  • Raise the medium-term interest rate floor used to compute the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) by 0.5%
  • Introduce an interest rate floor of 3% for computing the eligible loan amount

The medium-term interest rate floor will apply to loans from private financial institutions for the purchase of properties where

  • Option to Purchase (OTP) is granted on or after 30 Sep 2022, or
  • Date of Sale and Purchase Agreement is on or after 30 Sep 2022

The various institutions will continue to decide the actual interest rates on mortgages.

The interest rate floor on HDB housing loans meanwhile will apply to applications for the HDB Loan Eligibility (HLE) letter from 30 Sep onwards.

Those who’ve applied for the HLE before 30 Sep won’t have to worry.

HDB also assured that their actual concessionary interest rate will remain at 2.6% per annum.

Longer wait-out period for private residential property owners

In addition to the interest rate floors, the authorities will also be reducing the Loan-to-Value (LTV) limit for HDB housing loans from 85% to 80%.

The change will apply to new flat applications for sales exercises and complete resale applications HDB receives from 30 Sep.

In terms of demand for resale homes, HDB hopes to ease it by making private residential property owners (PPOs) wait 15 months before buying a resale flat.

According to Channel NewsAsia (CNA), PPOs could previously buy a resale flat as long as they could sell their homes within six months of their purchase.

However, seniors 55 years old and older who are moving from a private residence to a 4-room or smaller resale flat need not adhere to this rule.

For more details regarding the new rules, you may visit HDB’s website here.

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Featured image adapted from @jiachenlin on Unsplash.

Fayyadhah Zainalabiden

Fayyadhah spends most of her free time wondering why there's nothing fun to do and wastes the rest of her time on Netflix.

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