Feedback from some borrowers that they were unable to refinance their residential properties to take advantage of the low interest rate environment because they could not meet the total debt servicing ratio (TDSR) threshold has prompted the Monetary Authority of Singapore (MAS) to introduce some flexibility to the rules.
The TDSR framework stipulates that borrowers cannot take on total debt obligations exceeding 60 per cent of their gross monthly income.
With immediate effect, borrowers may be exempted from the threshold if they meet certain conditions. Previously, they might obtain exemption only to the refinancing of loans for properties bought before the introduction of the TDSR framework in June 2013.
Now the exemption applies to all owner-occupied housing loans.
This new flexibility does not represent a relaxation of property cooling measures as the TDSR framework will still apply to new housing loans, the MAS said yesterday.
Refinancing of properties bought for investment was also made less onerous. Previously, investment property loans could be refinanced above the 60 per cent TDSR threshold if the borrower committed to a debt reduction plan and applied for refinancing before June 30, 2017.
Now, to get the TDSR exemption, the debt reduction plan should involve the borrower committing to repay at least 3 per cent of the loan's total outstanding balance over three years. The borrower would also have to meet the bank's credit assessment criteria.