Home loans harder to get with tighter rules

More applications being rejected and wait for approvals is longer: Analysts

Much of the longer approval process has to do with additional documents needed to verify a buyer's existing monthly debt repayments.
Much of the longer approval process has to do with additional documents needed to verify a buyer's existing monthly debt repayments. ST FILE PHOTO

Home buyers have found it harder to obtain loans in the wake of tighter mortgage rules imposed last year.

Real estate players said buyers now have to wait longer for their loans to be approved and more are having their loan applications rejected, after the total debt servicing ratio (TDSR) framework was put in place in June by the Monetary Authority of Singapore (MAS).

Ms Christine Li, the head of research and consultancy at OrangeTee, told The Straits Times that only 12 potential buyers out of 80 were able to get their full desired loans for a property project launched last year after the TDSR was implemented.

Another property analyst disclosed that bankers have said loan rejection rates rose to as much as 20 to 25 per cent when the TDSR was implemented, where previously such rejections were rare.

"A lot of checks are now required and the MAS is asking the banks for clarifications," said the analyst, who declined to be named as the information is confidential. "It's making the banks very frustrated, it's making it tough on the buyers and it's making it difficult for agents to sell the units too," she added.

But some bankers and property consultants said the situation has recently improved as customers become more familiar with the process, now that the TDSR has been in place for some 10 months.

The TDSR limits a borrower's overall monthly debt repayment to no more than 60 per cent of his gross monthly income. That means home buyers with more existing debt - such as a car loan and credit card bills - have less room for taking out a mortgage.

Banks that spoke to The Straits Times largely declined to comment on the rejection rate or size of property loans, though they acknowledged that the loan approval process may take longer now.

OCBC's head of consumer credit risk management Joseph Wong said: "We have not seen a drop in the approval rate as customers will typically do a self-assessment before approaching the bank to apply for a home loan."

Mr Dwaipayan Sadhu, Standard Chartered's head of consumer transaction banking and mortgage in Singapore and South-east Asia, said: "While the loan approval process may be lengthier for those who do not have the necessary documents in place, the TDSR process has helped standardise practices across banks and helped ensure that customers stay within their repayment abilities in the longer term."

Much of the longer approval process has to do with the additional documents needed to verify the applicant's existing monthly debt repayments.

Borrowers may not always be aware of what papers they need for their loan approvals, such as their credit card statements.

Ms Chia Siew Cheng, the head of secured loans at United Overseas Bank (UOB), said: "The TDSR framework requires home buyers to submit additional documents which provide a more holistic view of their total debt obligation for their property purchase."

UOB has also come up with a checklist of some of the documents applicants should bring, highlighting the changes to make it easier for them.

Ms Linda Lee, the executive director for deposits and secured lending at DBS, said: "As long as the customer has submitted the required documents, the timeline for loan approval remains the same."

SLP International Property Consultants' head of research Nicholas Mak suggested that loan rejections have likely fallen by now. "If (home buyers) have been rejected once already, they would know how much (in loans) they are eligible for and will not ask for more than that without an increase in income," he said.


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