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19-11-2011, 08:07 AM
I think it's a rather misleading article - home buyers are borrowing less or the function of their borrowing over the market value of their flat has dropped? It was mentioned in the article that rising home prices could give the illusion of wealth - that one was being "prudent" because the LTV is say <60%; but remember that the formula is Loan Amount/Value of Home. If the denominator keeps rising, does this make home mortgages look more and more prudent? 
The Straits Times
Nov 19, 2011
Home buyers borrowing less
They are putting more cash down as mood of prudence takes hold, MAS data shows
By Esther Teo
BUYERS are putting proportionally more cash down when purchasing a home and cutting back on borrowings as a new mood of prudence takes hold.
The safety-first approach is reflected in data from the Monetary Authority of Singapore (MAS) which shows that loan-to-value (LTV) ratios have fallen sharply.
An LTV ratio of 80 means the buyer has borrowed 80per cent of the home value.
The MAS found that loans with an LTV ratio of more than 80 per cent have fallen to 4.9 per cent of all outstanding mortgages in the three months to Sept 30 - the lowest since 2004.
It is also well down on the peak of 17.3per cent in the third quarter of 2009, according to the MAS' Financial Stability Review released yesterday.
The number of new loans in the third quarter with an LTV ratio of more than 70 per cent has also fallen by more than 20per cent since the middle of last year as mortgage growth slowed, the report noted.
The figures point to a new trend among buyers, who are putting more cash down due to tighter financing rules so they can cut back on borrowings and protect themselves if prices fall or interest rates soar.
Loans with a high LTV ratio of, say, 70 per cent or 80per cent raise the risk that the borrower will find himself in negative equity - where the loan exceeds the property's value - if property prices drop in a downturn.
The average LTV ratio for loans was 44.1 per cent as at Sept 30.
The number with negative equity was negligible compared with the 2.9 per cent in the third quarter of 2009.
The asset quality of housing loans also remains robust with non-performing loan ratios at 0.3 per cent as of Sept 30.
More than 70 per cent of mortgages are also for owner-occupied homes, which tend to have a lower risk profile.
The review said that one of the objectives of the cooling measures since September 2009 was to encourage financial prudence among buyers.
The January measures lowered the LTV ratio to 60per cent from 70 per cent for buyers with an existing home loan.
'These measures were intended to prompt prospective home buyers to consider more carefully the longer-term implications of their ability to afford properties, notwithstanding the current low interest rate environment, and appear to have a tempering effect on housing loan growth,' the review added.
Experts noted that the decline in LTV ratios can also be attributed to rising property prices - up 18 per cent last year and 6 per cent in the first nine months of this year.
Dr Chua Yang Liang, head of research at Jones Lang LaSalle South-east Asia, acknowledged that the Government's tighter financing rules also played a part.
'It could also mean that there were more new loans taken by property investors borrowing at 60per cent (versus) first-time buyers borrowing at 80 per cent, compared with the previous quarter,' he added.
Most banks also say that their mortgage business is slowing in line with the falling number of transactions as the cooling measures take their toll.
Ms Phang Lah Hwa, OCBC Bank head of consumer secured lending, said home loan growth in recent months has moved in tandem with market demand.
'Going forward, the cautious view of the economy is expected to be reflected in the moderation of our home loan growth,' she added.
But despite the uncertain economic outlook, the bank has not revised credit guidelines to hold back lending with the current market outlook, Ms Phang said.
The MAS report also noted that home buyers with private property addresses are driving the market.
While the recovery in buying in early 2009 seemed to have been driven mainly by HDB upgraders, the share of private property purchases by buyers with private addresses stood at 62 per cent in the third quarter.
This is down from the peak of 67 per cent in the second quarter of last year, but up from the 44 per cent in the first three months of 2009.
MAS noted that developer sales remained firm even as the property cooling measures appear to have dampened the momentum in the property market. It added that with Singapore being viewed as a safe haven, investors may continue to buy homes here. The Government will continue to be vigilant in monitoring developments, MAS said.
esthert@sph.com.sg
Additional reporting by Aaron Low
The Straits Times
Nov 19, 2011
Home buyers borrowing less
They are putting more cash down as mood of prudence takes hold, MAS data shows
By Esther Teo
BUYERS are putting proportionally more cash down when purchasing a home and cutting back on borrowings as a new mood of prudence takes hold.
The safety-first approach is reflected in data from the Monetary Authority of Singapore (MAS) which shows that loan-to-value (LTV) ratios have fallen sharply.
An LTV ratio of 80 means the buyer has borrowed 80per cent of the home value.
The MAS found that loans with an LTV ratio of more than 80 per cent have fallen to 4.9 per cent of all outstanding mortgages in the three months to Sept 30 - the lowest since 2004.
It is also well down on the peak of 17.3per cent in the third quarter of 2009, according to the MAS' Financial Stability Review released yesterday.
The number of new loans in the third quarter with an LTV ratio of more than 70 per cent has also fallen by more than 20per cent since the middle of last year as mortgage growth slowed, the report noted.
The figures point to a new trend among buyers, who are putting more cash down due to tighter financing rules so they can cut back on borrowings and protect themselves if prices fall or interest rates soar.
Loans with a high LTV ratio of, say, 70 per cent or 80per cent raise the risk that the borrower will find himself in negative equity - where the loan exceeds the property's value - if property prices drop in a downturn.
The average LTV ratio for loans was 44.1 per cent as at Sept 30.
The number with negative equity was negligible compared with the 2.9 per cent in the third quarter of 2009.
The asset quality of housing loans also remains robust with non-performing loan ratios at 0.3 per cent as of Sept 30.
More than 70 per cent of mortgages are also for owner-occupied homes, which tend to have a lower risk profile.
The review said that one of the objectives of the cooling measures since September 2009 was to encourage financial prudence among buyers.
The January measures lowered the LTV ratio to 60per cent from 70 per cent for buyers with an existing home loan.
'These measures were intended to prompt prospective home buyers to consider more carefully the longer-term implications of their ability to afford properties, notwithstanding the current low interest rate environment, and appear to have a tempering effect on housing loan growth,' the review added.
Experts noted that the decline in LTV ratios can also be attributed to rising property prices - up 18 per cent last year and 6 per cent in the first nine months of this year.
Dr Chua Yang Liang, head of research at Jones Lang LaSalle South-east Asia, acknowledged that the Government's tighter financing rules also played a part.
'It could also mean that there were more new loans taken by property investors borrowing at 60per cent (versus) first-time buyers borrowing at 80 per cent, compared with the previous quarter,' he added.
Most banks also say that their mortgage business is slowing in line with the falling number of transactions as the cooling measures take their toll.
Ms Phang Lah Hwa, OCBC Bank head of consumer secured lending, said home loan growth in recent months has moved in tandem with market demand.
'Going forward, the cautious view of the economy is expected to be reflected in the moderation of our home loan growth,' she added.
But despite the uncertain economic outlook, the bank has not revised credit guidelines to hold back lending with the current market outlook, Ms Phang said.
The MAS report also noted that home buyers with private property addresses are driving the market.
While the recovery in buying in early 2009 seemed to have been driven mainly by HDB upgraders, the share of private property purchases by buyers with private addresses stood at 62 per cent in the third quarter.
This is down from the peak of 67 per cent in the second quarter of last year, but up from the 44 per cent in the first three months of 2009.
MAS noted that developer sales remained firm even as the property cooling measures appear to have dampened the momentum in the property market. It added that with Singapore being viewed as a safe haven, investors may continue to buy homes here. The Government will continue to be vigilant in monitoring developments, MAS said.
esthert@sph.com.sg
Additional reporting by Aaron Low
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