Housing loan limits – including for HDB loans – tightened in fresh measures to cool property market
Housing loan limits – including for HDB loans – tightened in fresh measures to cool property market. The government stated late last night that new measures to tighten limits on house loans, including public housing, will go into effect on Friday (Sep 30), in a bid to ensure cautious borrowing and lower demand.
The Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) for residential and non-residential property will be calculated using a higher interest rate – 0.5 percentage point higher. The new restriction will apply to real estate loans where the Option to Purchase (OTP) is granted on or after September 30, 2022, or the Sale and Purchase Agreement is completed on or after September 30, 2022.
Mortgage interest rates will continue to be determined by private financial institutions.
The permitted loan amount available to borrowers seeking HDB loans for Housing Development Board apartments will be calculated using a 3% interest rate floor, and the Loan-to-Value (LTV) cap for HDB housing loans would be cut from 85% to 80%. The lower LTV limit will apply to new flat applications received by HDB on or after September 30, 2022, as well as complete resale applications received on or after that date.
To further chill demand in the HDB resale market, where million-dollar HDB flats continue to change hands, the government plans to impose a 15-month waiting period on private residential property owners and prior private property owners who want to buy a non-subsidised HDB resale unit. Private property owners can now buy a non-subsidised HDB resale unit on the open market if they sell their private property within six months of obtaining the HDB apartment. This will no longer be allowed.
However, the wait-out period will not apply to seniors 55 and older who are shifting from their private home to a 4-room or smaller resale flat. The new criterion, according to a joint statement published by the MAS, MND, and HDB, is “a temporary measure that will be revisited in the future based on general market conditions and housing demand.”
“Since the government enacted a broad package of measures in December 2021, the HDB Resale Price Index has risen by more than 5% as of end-Q2 2022, reflecting a broad-based increase in public housing demand,” according to the government. Given the apparent upward trend in HDB resale pricing, MND and HDB would impose a 15-month waiting period for PPOs and exPPOs to acquire a non-subsidised HDB resale flat as a temporary step to control demand and ensure that resale flats remain affordable for flat buyers, particularly first-timers.”
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