Singapore mortgages slow sharply as sentiment sours

Home loan growth slowed to 1.9% in January-November 2018 from 4.2% in 2017.

Bloomberg reports that Singapore banks can expect their mortgage books to continue declining and possibly stay stuck below 2% in 2019 on the back of weakening sentiment in the property market and rising interest rates. 

Also read: Higher mortgages loom as Singapore banks offset dismal lending

Home loan growth already slowed to 1.9% in the first 11 months of 2018 which is less than half the 4.2% increase in 2017, data from the Monetary Authority of Singapore show.

The Singapore mortgage book of DBS already took a blow after mortgages hit $2.5b in 2018 compared to the $4b that was initially anticipated at the start of the year as the higher Additional Buyers’ Stamp Duty (ABSD) and tightened Loan-to-Value (LTV) limits on home purchases took its toll.

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The slowdown in credit could possibly hasten the decline in Singapore home prices which fell for the first time in six quarters in the final quarter of 2018.

As mortgage rates rise, the non-performing loan (NPL) ratio of the housing segment is expected to rise from 0.4% in 2018 to 0.7% in 2020, according to a report from Fitch Ratings.

"The housing NPL ratio was 0.4% in 2Q18 and we expect it to rise only slightly to 0.55% in 2019 and 0.65% in 2020," the ratings agency said. "However, we expect any increase in delinquencies to be limited due to support from rising household incomes, a tight labour market and strong household balance sheets."

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