Singapore’s household and corporate debt situation holding up well to rising interest rates: Alvin Tan

SINGAPORE – The country’s household and corporate debt situation remains resilient despite rising interest rates, Monetary Authority of Singapore (MAS) board member Alvin Tan told parliament. Monday, May 9.

The number of financially troubled consumers who have sought help from banks is not high and has been declining over the past year, said Mr. Tan, who is also Minister of State for Trade and Industry.

He noted that the proportion of non-performing mortgages remained low, at less than 1% last year.

“The MAS stress test suggests that the median household mortgage service ratio should remain manageable even under significantly higher interest rate or lower income scenarios,” he said.

The mortgage service ratio refers to the portion of a borrower’s gross monthly income that is spent on paying off home loans.

Mr Tan added that the proportion of non-performing business loans also remained low at 2.6%.

“Here too, the MAS stress test suggests that debt service for Singapore-listed companies should remain manageable as interest rates rise, with most companies having sufficient revenues to cover their interest charges. and cash reserves to provide buffers.”

He was responding to a question from Mr. Saktiandi Supaat (Bishan-Toa Payoh GRC) on whether given the rise in interest rates there has been an increase in the number of consumers applying for management assistance debt and whether the government will put in place measures for consumers and businesses facing short-term liquidity problems.

Mr Tan said industry-wide credit relief measures have been gradually withdrawn, in line with a broader economic recovery and a steady decline in the number of requests for help.

These measures, introduced in March 2020, were intended to provide short-term relief to individuals and small and medium-sized businesses, as strict public health measures were causing temporary cash flow difficulties.

Mr. Tan added: “Conversely, recent market-driven interest rate hikes have been accompanied by continued revenue growth, which mitigates their impact on the debt servicing capacity of the most borrowers.

“Indeed, the debt relief programs put in place during the pandemic are not intended to insulate borrowers from the normalization of interest rates.”

Mr Tan added, however, that a small segment of households, particularly those with higher debt levels, may be more constrained by rising rates and should approach their lenders early to explore possible refinancing and repayment options. loans.

He added that the MAS has been working with the Departments of National Development and Manpower, the Housing Board (HDB) and financial institutions to establish “standardized interventions” for HDB home owners in financial difficulty. in case of late repayment.

These include potential solutions for loan restructuring, early referrals to appropriate social service agencies and, in some cases, helping them secure alternative HDB housing when foreclosures are unavoidable.

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