National Development Minister Khaw Boon Wan said the 50-year mortgage bank loans that are available now are not likely to have significant impact on the public housing market.
In a written reply to a question by Member of Parliament Chen Show Mao, Mr Khaw added that while some borrowers may be attracted by the lower monthly instalments, the ministry does not expect 50-year housing loans to be popular.
Mr Chen had asked about the likely effect of such bank loans on the prices, financing and affordability of HDB flats.
In his reply, Mr Khaw also said that 50-year housing loans will cost the borrowers more and also impose a longer-term financial burden on them.
Despite the lower monthly instalments offered by such loans, Mr Khaw said that home buyers will end up paying higher interest in total, and service the loan past their retirement when they no longer have a steady income.
Mr Khaw said HDB does not offer 50-year loans as they are not necessary.
He added that HDB’s Build-to-Order flats are priced affordably and there is no need for working couples to take 50-year mortgages to purchase HDB flats.
The maximum loan tenure for HDB housing loans is 30 years, with an age ceiling of 65.
But Mr Khaw said in practice, the average loan tenure taken up is lower at 24 years.
At this loan tenure, Mr Khaw said the monthly housing loan instalment makes up about a quarter of the monthly household income, and it can be mostly paid for using CPF contributions with zero or minimum cash outlay.
United Overseas Bank drew controversy when it launched a new 50-year home loan in July, which is geared towards young executives in their late 20s to early 30s.
At a community event on August 5, Mr Khaw had encouraged home buyers to be prudent and not to fall for gimmicks such as 50-year loans.
Source : Channel NewsAsia – 13 Aug 2012