New property cooling measures: Gov’t imposes stringent housing loan limits 

This includes a 15-month wait-out period when selling a flat.

As the rising interest rates won’t end anytime soon, the government decided to enforce new cooling measures that will strictly put in place maximum loan limits for the housing market.

“To ensure prudent borrowing and avoid future difficulties in servicing home loans, the Government will tighten the maximum loan quantum limits for housing loans,” read the joint statement of the HDB, the Monetary Authority of Singapore (MAS) and the Ministry of National Development (MND).

According to the government institutions, they will assume higher interest rates when evaluating borrowers’ repayment ability through these two measures:

1. MAS will increase by 0.5%-point the medium interest rate floor used to compute the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) for property loans provided by private financial institutions.

• This will apply to loans for the purchase of properties where the Option to Purchase (OTP) is granted on or after 30 September 2022, or where there is no OTP, the date of the Sale and Purchase Agreement is on or after 30 September 2022.

• The actual interest rates charged for mortgages will continue to be determined by the private financial institutions.

2. HDB will launch an interest rate floor of 3% for computing an eligible loan amount for housing loans granted by HDB.

• The interest rate floor will apply to fresh applications for an HDB Loan Eligibility (HLE) letter received on or after 30 September 2022, 00:00 hours.

• There will be no impact to existing HLE applications received by HDB before this time. 

• This will not affect the actual HDB concessionary interest rate, which will remain unchanged at 2.6% p.a

The government said it will also decrease the Loan-to-Value (LTV) limit for HDB housing loans from 85% to 80%. 

“The lower LTV limit will apply to new flat applications for sales exercises launched and complete resale applications which are received by HDB on or after 30 September 2022,” read the joint statement.

As for the HDB resale market, the government seeks to moderate its demand. Which is why it will enforce a wait-out period of 15 months for private residential property owners (PPOs) and ex-PPOs to buy a non-subsidised HDB resale flat. 

The wait-out period will not take effect on seniors aged 55 and above, who are moving from their private property to a four-room or smaller resale flat.

“This new measure will take effect from 30 September 2022. It is a temporary measure which will be reviewed in future depending on overall market conditions and housing demand,” said the government.

These fresh property cooling measures also stemmed from promoting inclusivity for public housing. 

“We will continue to monitor the property market and adjust our policies to ensure that they remain relevant,” it said.

The house owners were likewise asked to be vigilant before applying on new loans and make sure of their debt-servicing ability before making long-term financial commitments.

Three property measures were introduced in December last year to cool down the market. Most homebuyers felt the impacts of these cooling measures, even considering buying commercial properties instead.