Why broadened TDSR exemptions won't have material impact on bank earnings

Will only slightly lift mortgage growth.

The Monetary Authority of Singapore (MAS) has decided to broaden the existing exemption from the Total Debt Servicing Ratio (TDSR) of 60% to borrowers who face challenges refinancing owner-occupied housing loans that were bought before the introduction of the TDSR limit.

Aside from the slight improvement in mortgage growth, the widened exemption will have "immaterial impact" overall on bank earnings, forecasts Barclays Research.

"We believe the exemption to the TDSR threshold for home owners that wish to refinance is a slight positive for housing loan growth as it gives existing home owners the option to refinance and an opportunity for banks to compete for housing loans as home owners can more easily switch between banks," said Barclays Research.

"However, we do not believe it will have a material impact on earnings given the limited scope of the exemption, which would only apply to owner-occupied properties. Refinancing for investment property loans will still be subject to the 60% TDSR, though the MAS has introduced a transitional period until 30 June 2017, subject to certain conditions," it added.