How Singapore banks will be affected by new property loan rules

Limited impact on mortgage approvals.

According to Maybank Kim Eng, based on its channel checks, the Total Debt Servicing Ratio (TDSR) of the domestic banks currently averages a comfortable 40-50% while the interest rate assumed is just above 3%. 

Maybank noted that it is unclear whether other computation matrixes are as stringent as that prescribed by the MAS but the lower average TDSR against the cap of 60% provides some buffer.

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As such, we do not think that there will be a significant impact to mortgage approvals at this stage. While some cooling off of property loan approvals cannot be ruled out, we expect the impact to be limited.

We maintain our Neutral stance on the banks with DBS being our top pick – 2013 yields are a decent 3.7% post-correction while the group is least exposed to Singapore’s property sector (19% of total loans ex DBS HK vs 23% and 26% for OCBC and UOB respectively, exMalaysia).