50-year home loan a 'gimmick', says Khaw

In the midst of global economic uncertainties, Singaporeans should stay focused, be prudent and spend within their means, said Minister for National Development Khaw Boon Wan yesterday.

He also advised Singaporeans against taking up 50-year housing loans, which at least one bank here has recently started offering.

Last month, The Straits Times reported that United Overseas Bank (UOB) had started offering home loans spanning 50 years, likely the longest-term loan available here. Among other banks, loans range from an average of 20 to 40 years.

Mr Khaw said he checked on the take-up rate of this new 50-year loan and "so far, the number is very few, which I think is a good sign, that Singaporeans know we should always be prudent".

When asked, UOB's head of secured loans, Ms Chia Siew Cheng, said the majority of those who take up a home loan with the bank still tend to apply for loans with a tenor ranging from 25 to 30 years.

The bank also carefully assesses each application for all types of home loans, and applicants cannot be above the age of 80 at the end of the loan period, she said.

Analyst said that while a 50-year loan would allow people to take a bigger loan and buy a more expensive property, there would not be much room to manoeuvre if the interest rate were to go up, or if the person were to lose his source of income, and the borrower might be caught in a financial vice.

Source: The Straits Times – 6 August 2012