There have been speculations about new cooling measures for the whole of 2022 as property prices and interest rates kept soaring. Now, they are finally here. As they say, be careful what you wish for. The current cooling measures are very targeted at making sure home buyers do not overextend themselves by taking up loans they cannot afford.
A 15-month wait-out period for PPO and ex-PPO will be added for non-subsidised HDB resale flats with the exception of seniors aged 55 and above who want to downgrade to a 4-room or smaller flat for retirement. The 30 months waiting period for subsidised HDB flats will remain unchanged. In addition, PPOs/ex-PPOs, regardless of age, with extenuating circumstances, e.g. financial difficulties, may approach HDB for assistance, and they will assess your situation on a case-by-case basis.
How am I affected by the Stress Test Medium Term Interest Rate and HDB Loan LTV changes?
For those taking a bank loan, the TDSR remains at 55%.
However, the stress test interest rate used to calculate Loan affordability for Residential Private Property will be raised by 0.5%, to a total of 4%.
The stress test interest rate used to calculate Loan affordability for Commercial Property will be raised by 0.5%, to a total of 5%.
For those buying an EC from a developer, the MSR remains at 30%.
For those taking an HDB loan when buying an HDB, the MSR remains at 30%.
However, the stress test interest rate for HDB Loans will be at 3%, up from the 2.6% previous interest rate. On top of this, LTV for HDB housing loans will be reduced from 85% to 80%.
For Private Residential Property Purchase
For those taking a bank loan for a private residential property, Using an example to help you gauge the impact, we use the following assumptions. Household income: $10,000. Borrower’s Age: 35, Max 30 years tenure. Under the current 55% TDSR rule, assuming you have no other loans, your total mortgage can only go up to the max. of $5,500 a month. Previously under the 3.5% interest rate used for TDSR calculation, the Loan quantum was $1,224,822. Now after the 0.5% raise to 4%, the Loan quantum is $1,152,037. This is around a 5.94% reduction in loan quantum. (Note: This % reduction varies with loan tenure, etc) For HDB Residential Property Purchase
Change of HDB Loan Stress test Interest Rate from 2.6% to 3%
HDB Loan rates still remain at 0.1% + CPF OA rate = 2.6%
This example is for those buying a HDB or taking HDB loan,
Under the current 30% MSR rule,
Household income: $10,000.
Borrower’s Age: 35, Max 25 years tenure.
Previously under 2.6% interest rate used for MSR Calculation would mean an HDB LOAN quantum of ~$661K.
Now, after an increase to 3% interest rate used for MSR Calculation, this means HDB LOAN quantum of ~$632K.
This is around a 4.33% reduction in loan quantum. (Note: This % reduction varies with loan tenure, etc.)
Change of HDB Loan LTV from 85% to 80%
Assuming a 600K HDB flat,
Previously with LTV 85%, would mean a Loan quantum of up to 510K
Now with LTV of 80%, would mean a Loan quantum of up to 480K
*Subject to TDSR/MSR.
How does the wait-out period of 15 months for private residential property owners (PPOs) and ex-PPOs to buy a non-subsidised HDB resale flat impact me if I’m below 55 years old?
If you have sold your current private property or are in the midst of marketing your private property and are considering to relocate to an HDB, there may be changes in your Financials, Loan Affordability, Timeline for sale and next purchase, and options for your next place of residence, etc., due to the recent measures.
If you have any questions or concerns still unaddressed, you may contact us here. We can help advise on whether you are affected by the recent cooling measures and how you can adjust your property journey to appropriately navigate these tough macroeconomic conditions. We also have tools to help you find out the loan quantum you may be eligible for.
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