Banks in Singapore likely have enough buffer to meet new mortgage restrictions: analysts

Bank analysts say that banks here are likely to be somewhat cushioned against the impact of the latest move by the Monetary Authority of Singapore (MAS) to tighten home loan financing.

The MAS on Friday said it would impose a standardised total debt servicing ratio (TDSR) framework for banks to assess home buyers' ability to borrow.

Under the framework, a buyer's TDSR should not be higher than 60 per cent. Banks also have to use a notional medium-term interest rate of 3.5 per cent for housing loans.

The MAS said the move was to strengthen banks' credit underwriting practices and encourage financial prudence among borrowers.

Analysts said on Monday that the TDSRs for banks here are likely to be lower than the 60 per cent level.

"Based on our channel checks, the TDSR of the domestic banks currently averages a comfortable 40 to 50 per cent while the interest rate assumed is just above 3 per cent," said analysts from Maybank Kim Eng in a note on Monday.

CIMB Research analysts also said on Sunday that they believed the new mortgage restrictions were unlikely to trigger a housing collapse.

They said that banks here have generally kept to a mortgage servicing ratio (MSR) limit of 30 per cent to 40 per cent and the average MSR across the industry is around 28 per cent to 30 per cent.

An OCBC Investment Research report on July 1 estimated that the mortgage restrictions "could affect, off the bat, 5 per cent to 20 per cent of the current cross-section of buyer profiles".