Chart of the Day: Check out the sorry state of Singapore’s bad housing loans

Housing loans account for 71% of household debt.

A large chunk of the city-state’s household debt consists of household loans, and while the number has been relatively stable, the slower growth in Singapore’s economy poses a significant threat.

According to a report by Moody’s, Singapore’s resident unemployment rate rose to 3% in June 2016, which in turn would weigh on household debt service capability.

Meanwhile, the report added how improved household debt metrics could be good news to Singapore banks.

“Last Tuesday, the Monetary Authority of Singapore (MAS) released data showing that Singapore resident households’ debt-servicing ratio had improved since the June 2013 introduction of the total debt servicing ratio (TDSR) framework. Improved household debt metrics will support the asset quality of retail loans, a credit positive for Singapore banks,” the report said.

The report added that large Singapore banks with significant exposure to the sector include DBS, OCBC, UOB, and Standard Chartered Bank Singapore.

“At year-end 2015, around 20% of consolidated loans for DBS, OCBC and UOB were provided to domestic households. At SCBSL, that level was 92%. The improved debt service ratios mean that borrowers have more headroom to withstand higher interest rates, which in turn protects banks from loan delinquencies if interest rates rise further,” the report added.