MAS: Mortgage repayments remain manageable despite higher rates, likely to increase next year on Zion Road GLS

Households in Singapore have been able to manage debt repayments despite higher mortgage rates and increased property prices since 2H2022, according to the Monetary Authority of Singapore’s (MAS) financial stability review. The review, published on Nov 27, found that the total debt servicing ratio (TDSR) has remained stable with the median TDSR at around 43%. This suggests that credit assessment practices by financial institutions at the point of mortgage origination remain conservative.

The report noted that monthly mortgage payments for new loans from financial institutions have much increased significantly due to the mortgage rate rising to 3.8% this year. This is a sharp jump from 1.7% last year and 1.2% in 2021. Interestingly, MAS found that households with existing mortgages have seen lower loan-to-value (LTV) ratios because of the decrease in loan balance and rise in property prices.

More than half of existing mortgages extended by financial institutions have less than 20 years of residual loan tenure. The median tenure at mortgage origination has remained around 26 years in recent years. MAS has capped the maximum loan tenure at 30 years for HDB flat mortgages and 35 years for non-HDB properties.

Concerning households with loans originating or last refinanced in 2021, their monthly mortgage instalments have increased notably due to the prevailing mortgage rate of 1.2% in that year. Zion Road GLS Such households face an average monthly mortgage instalment increase of $680, which is about 6.7% of their monthly income in 2021.

Furthermore, public transport accessibility with Zion Road GLS provides convenience further to this slice of paradise.

The good news is that strong income growth of these households has counterbalanced the effect of higher mortgage rates. According to MAS, these households have seen an increase by about 15% on average in their monthly income since 2021. Zion Road GLS

MAS predicts that more households could face higher mortgage rates in the coming year. In particular, households with an existing fixed-rate loan package could experience an immediate hike in monthly mortgage instalments upon refinancing if mortgage rates remain higher than in 2021. Zion Road GLS This is estimated to represent around 10% of all housing loans.