Minister Reassures That Over-stretched Mortgagors Do Not Pose Higher Default Risk
In a reply to Nominated MP Laurence Lien and Non-Constituency MP Yee Jenn Jong in Parliament, Mr Lawrence Wong, a director on the board of the Monetary Authority of Singapore (MAS) and Acting Minister for Culture, Community and Youth, clarified that overextended home loan borrowers do not equate to higher default risk when interest rares rises.
On behalf of Deputy Prime Minister and MAS chairman Tharman Shanmugaratnam, Mr Wong pointed out that while 5 to 10% of borrowes are over-leveraged with more than 60% of their monthly income going to debt re-payments, this category of borrowers has above-average household income levels and almost all are servicing private housing loans, and above 80% only has one mortgage.
Mr Wong also noted that Singaporeans have lower debt levels compared to more than 10 years ago.The household debt-to-income ratio was 2.6 when it peaked in the last decade, but fell to about 2.1 last year.
In the aggregate, even after netting out property assets; cash and deposits owned by households exceed debt. This means that overall household finances are still healthy.
Mr Wong also cautioned that household’s debt service burden is only a “rough guide” and not a precise indicator of over-leveraging.
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