Unpaid credit card balances dropped to 2.6%

MAS said Singapore's debt situation has improved.

As part of the Monetary Authority of Singapore's (MAS) financial stability review, it revealed that the overall unsecured debt situation in Singapore has improved.

It cited data from CBS showing that the growth in outstanding credit card balances extended by financial institutions (FI) has eased considerably from the peak of 14% YoY in 2Q2012 to an average of 2.6% YoY in the first nine months of 2017.

The ratio of outstanding credit card balances to GDP stabilised at about 2.5 times since the first quarter of 2015, after rising from 1.6 times in 1Q2008 to 2.7 times in 4Q2014.

The share of revolvers has also fallen substantially, from 35% in the first quarter of 2015 to 28% in 3Q2017. Moreover, the decline is reflected across cardholders in all age groups.

Rollover balance, the amount of outstanding balance that is not paid in full within the billing month, has also dropped.

The rollover balances to GDP ratio has moderated, from 1.4 times in 1Q2015 to 1.2 times in 3Q2017. Rollover balances per cardholder fell 4.7% YoY in this quarter.

Credit card charge-off rates eased further to 6% in Q3 2017, from the peak of 6.8% in Q2 of 2015.

"The financing situation for highly-indebted borrowers has also improved. The industry-wide borrowing limit has triggered action by highly-indebted borrowers," MAS said.

Here's more from MAS:

As of August 2017, there were 27,000 borrowers with outstanding unsecured debt exceeding 18 times their monthly income compared to 51,000 in February 2015, a decline of 47%.

This reduced number represents less than 2% of all unsecured credit borrowers and less than 0.5% of Singapore’s total population.

The drop is mirrored in the number of borrowers with unsecured balances exceeding 12 times their monthly income, which has fallen from 5% of unsecured credit users to 4% over the same period. However, despite the aggregate decline, we continue to observe new borrowers with debts above 12 times their monthly income.

Although credit card penetration and usage have decreased, consumer credit services offered by Fintech companies could facilitate a rise in unsecured credit by lowering loan administration costs.