On 9 December 2013, the Monetary Authority of Singapore (the "MAS") issued revised Notices on Computation of Total Debt Servicing Ratio for Property Loans (collectively, the "Notices"). The changes made to the Notices aim to cap the Mortgage Servicing Ratio ("MSR") for housing loans granted by financial institutions ("Fls") for executive condominium ("EC") units bought directly from property developers at 30% of a borrower's gross monthly income. This is in line with earlier measures introduced by the Housing and Development Board and the MAS to encourage financial prudence among buyers of public housing. lt discourages EC buyers from over-stretching their finances and supports an affordable and sustainable EC market.
The 30% MSR cap will apply to EC purchases where the option to purchase is granted on or after 10 December 2013.
The revised Notices were among three measures implemented by the Singapore Government for EC developments to bring the terms for ECs closer to that of public housing. These measures are set out in a press release issued by the Ministry of National Development (the "MND") on 9 December 2013.
The MAS introduced the Total Debt Servicing Ratio ("TDSR") framework on 29 June 2013 for all property loans granted by Fls to individuals. The TDSR framework requires Fls to factor in borrowers' other outstanding debt obligations when granting property loans. The object of the framework is to help strengthen credit underwriting practices by Fls and encourage financial prudence among borrowers.
To implement the 30% MSR cap, the MAS has revised MAS Notices 645, 1115, 831 and 128 to banks, merchant banks, finance companies, insurance companies respectively. These resources may be accessed via the following links to the MAS website www.mas.gov.sg:
- MAS Notice 645 - Computation of Total Debt Servicing Ratio for Property Loans (banks)
- MAS Notice 1115 - Computation of Total Debt Servicing Ratio for Property Loans (merchant banks)
- MAS Notice 831 - Computation of Total Debt Servicing Ratio For Property Loans (finance companies)
- MAS Notice 128 - Computation of Total Debt Servicing Ratio for Property Loans (insurance companies)