Banks wait to gauge impact

Banks could take a hit from the new rules on mortgage tenure but just how much they will be impacted remains unclear.

The Monetary Authority of Singapore (MAS) announced yesterday that a lower loan-to-value ratio will be imposed on loans with tenure of more than 30 years, or if the loan tenure extends beyond the borrower's retirement age of 65.

Bankers said the measures will certainly affect those taking out new loans and the mortgage-refinancing side of the lending business.

The most practical impact will be seen on older home-buyers. Those over 35 will have to take up a loan tenure of less than 30 years if they do not want to be affected by the lower loan-to-value ratio linked to the retirement age of 65.

Mr Dwaipayan Sadhu, Standard Chartered Bank's head of consumer transaction banking and mortgage for Singapore and South-east Asia, believes the new rules may also impact younger customers. He said: "Their monthly cash outflow would increase should they opt for 30-year loans instead of the current 35."

Maybank Singapore's head of lending business (consumer banking), Mr Alan Yet, agreed the refinancing market will likely be affected, but noted that as with earlier cooling measures, it does take time before the effects are seen.

Other experts think, however, that the impact could be muted.

Source: Business Times – 6 October 2012