Is MAS’ debt servicing framework tweak the first step to easing cooling measures?

It’s gunning for property prices’ continued soft landing.

Are the Monetary Authority of Singapore’s (MAS) recent tweaks to the Total Debt Servicing Ratio (TDSR) framework a lead-up to an easing of cooling regulations, or is it the proverbial canary in the house of debt?

According to a report by Jefferies, the changes are neither an easing nor a precursor to unwinding of property cooling measures.

“It is an effort towards an orderly deleveraging and continued soft landing of property prices. We reckon MAS is possibly foreseeing a further increase in the unemployment rate (which may be structural in nature) and volatility in household income,” Jefferies stated.

Meanwhile, the tweak is also a concern for banks, as the move poses a threat to the health of their mortgage portfolio.

“After all, a portfolio stress-tested at an interest rate of 3.5% should not need such a tweak. Neither will we rule out the possibility that properties are being revalued lower while being refinanced and top-ups are resulting in higher debt for the lack of equity,” noted the report.

“And finally, the fact that new rules supersede the earlier June 2017 timeframe for compliance with debt thresholds, reflects ground realities and the pace at which deleveraging can actually happen without a motivated seller becoming a distressed one,” it added.