Fewer home loans taken up as property market cools further

Source : Straits Times - 9 Apr 2008

Mortgage default rate also falls but some banks see refinancing deals rise

The number of home loans taken up has fallen sharply in recent months as the property market continues to contract.

Only 4,200 new home loans were approved in January, up about 13 per cent on the 3,722 in December but down 21 per cent from the peak of 5,319 last August.

The Credit Bureau of Singapore figures also show that 2,544 second mortgages were taken up in January, a 31 per cent drop from the high of 3,698, also last August.

‘We expect the growth in new mortgages to slow further this year,’ said Credit Bureau general manager Mark Rowley.

Inquiries for new home loans have also dropped, down to 8,923 in February, the lowest since April 2006.

Mr Gregory Chan, OCBC Bank’s head of consumer secured lending, said: ‘We have observed that property buyers are becoming more cautious in their purchase decisions.’

United Overseas Bank’s (UOB’s) head of loans, Mr Kevin Lam, said that ‘in line with property sales transactions, our loan applications were slower in January and February’ but there was ‘a pick-up in market activity at the end of March’.

His counterpart at HSBC Singapore, Ms Alice Chia, said the bank has ’seen a reduction in applications for new home loans, which is reflective of sentiment towards the property market’.

But she pointed to one area where banks are getting increased business - more people are re-mortgaging their home to take advantage of the declining interest rate environment.

‘We have seen an increase in the number of refinancing applications over recent months,’ she said.

Maybank and OCBC have also encountered more home owners looking to refinance.

Ms Helen Neo, Maybank’s head of consumer banking in Singapore, said it launched financing packages in February ‘catering to customers seeking refinancing’ and has received ‘an encouraging response’.

However, Standard Chartered and UOB said they have not seen a significant increase in customers wanting to refinance.

The Credit Bureau figures also revealed certain more positive aspects of the mortgage market.

The number of delinquent account holders has fallen to 4,636, or just 1.63 per cent of total mortgage holders - the lowest in two years.

This allays concerns raised during the speculative frenzy last year that some buyers would overstretch by taking on loans they could not afford.

Mr Rowley said the lower delinquency rate is ‘a good sign’ that Singapore customers are creditworthy, even as loan amounts have risen steadily.

The increase in the number of home owners with significantly larger mortgages has also been striking.

There were 7,404 home owners with outstanding balances on their mortgages of over $1 million in January. This was an 81 per cent jump over February last year. This segment makes up almost 3 per cent of the total number of mortgage holders in Singapore.