More Singaporeans taking multiple loans: Credit Bureau

Visitors at a used car showroom at Turf City on April 6, 2013. An increasing number of Singaporeans are taking out two or more loans, according to data from the Credit Bureau Singapore. -- ST PHOTO: SEAH KWANG PENG 
Visitors at a used car showroom at Turf City on April 6, 2013. An increasing number of Singaporeans are taking out two or more loans, according to data from the Credit Bureau Singapore. -- ST PHOTO: SEAH KWANG PENG 

Amount of debt per borrower has also risen from 5 years ago: Credit Bureau

Singaporeans are not only loading up on more and more debt these days but increasing numbers are taking out two or more loans.

The data comes from the Credit Bureau Singapore (CBS), which has found that going into the red is no longer the daunting move it once was, thanks in part to rock-bottom interest rates.

The CBS said the average amount of debt per borrower is well up compared with five years ago, as is the proportion of borrowers who have more than one loan.

Its findings shed more light on aggregate data recently released by the Monetary Authority of Singapore (MAS) as well as reports by banks and other organisations.

Raw numbers show how taking on debt has become far more routine in Singapore - and how problems could easily occur down the road if interest rates rocket.

There are 48,782 borrowers who have at least two mortgages in addition to other types of loans now. This is up 78 per cent from 27,343 similar borrowers in 2008.

The number of mortgage holders who also have at least one other debt - a car loan, for example - has shot up from 200,078 in May 2008 to 362,340 now, a rise of 81 per cent.

Borrowers are also taking bigger loans today. The average mortgage based on the principal sum was $345,998 in May this year, up about 4 per cent from 2008.

The CBS property data includes joint applicants for a single loan, so couples who apply for a loan together will be counted as two borrowers.

This means some households could in fact be paying back around twice this amount.

The data covers only borrowers who have taken out home loans from banks, and so excludes those with Housing Board loans.

The data also combines new home loan and refinancing cases as the database does not differentiate between the two.

The average monthly credit card balance has also risen, from $4,591 in 2008 to $5,488 today.

Consumers now have higher unsecured personal loans too. The average principal sum they owe has gone up from $8,887 in May 2008 to $12,678 as of May this year - that is a rise of 43 per cent.

Borrowers are also taking bigger bridging and renovation loans, although the average motor vehicle loan has fallen 6 per cent to $63,240 over five years, likely due to loan curbs introduced in February to cool the car market.

A credit crisis may not be imminent, but as CBS executive director William Lim told The Straits Times: "While consumer delinquency remains low, the servicing of debt may become a burden for the vulnerable group should low interest rates and full employment no longer apply."

The MAS warned last week that if interest rates were to rise by 3 percentage points, 10 per cent to 15 per cent of borrowers here could find themselves struggling to pay off their debts.

Singaporeans take up debt for two main reasons, noted financial planner Damian Pang - to pay for property investments or to fund their lifestyles.

"The prevalence of advertising everywhere promoting a 'live it up' attitude is one factor leading consumers to take up more debt," he said.

"Another factor is the wider availability of credit, such as credit cards or instant bank loans, along with instalment schemes for almost everything from holidays to electronics."

Realtor Willi Ching is servicing two mortgages on private properties and two car loans, costing about $5,200 a month in total instalments.

Mr Ching, 34, believes he has been prudent with his finances as his repayments still amount to less than half of his income. He also pays off his credit card bills in full every month.

"Frankly I'm not very worried about interest rates rising," he told The Straits Times.

"I took up a fixed-rate package for my property loans, so for the next couple of years, I will be paying 1.3 per cent to 1.5 per cent interest and after that, if I have to pay interest of about 2 per cent, I will still be OK.

"However, I do have to be more cautious about future big-ticket purchases."

CBS does not compile data on consumers' incomes, so its statistics do not show whether a borrower's earnings have kept up with his debt loads.

A Standard Chartered report earlier this month said Singaporean households had borrowings worth 151 per cent of their annual income last year, making them among the most indebted in Asia relative to income.

yasminey@sph.com.sg