High and dry: Delinquent high-end property debtors leave banks struggling

Jumbo mortgages are to blame.

Delinquent high-end borrowers are sticking out like a sore thumb for Singapore banks. An increasing number of negligent debtors have caused banks’ non-performing housing loans to climb, in spite of the fact that overall new household mortgage borrowers’ risk profile improved in 2014.

According to Moody;s, the risk of outstanding housing loans originated by Singapore banks has increased, as shown by increasing delinquencies on jumbo mortgages on investment property.

“This is because prices on underlying high-end properties have fallen and secondary market liquidity has decreased because of measures introduced by MAS to cool the property market,” noted Moody’s.

“Among the three large Singapore banks, United Overseas Bank Limited reported the largest deterioration in the quality of housing loans in 2014, although from a very low base (see Exhibit 3). Oversea-Chinese Banking Corp. Ltd. was second, with a very minor increase in housing NPLs. In contrast, the quality of housing loans originated by DBS Group Holdings Ltd. has improved,” the report added.