The Singapore government has announced new cooling measures, in a response to rising interest rates and record-high home prices.
When calculating these debt servicing ratios, the interest rate used will be either four per cent per annum, or the thereafter interest rate .Say you apply for a bank home loan of $500,000. You opt for a 25-year loan tenure. Using the floor rate of four per cent, this comes to about $2,639 per month.
The $3,839 cannot exceed 55 per cent of the borrowers’ income. That means the combined borrowers must earn at least $6,980 per month, to qualify for the $500,000 loan.The floor rate is set at higher than the market average, for the purposes of MSR and TDSR calculation. For example, most bank home loans are close to three per cent at the time of writing; but a floor rate of four per cent is used, to ensure there aren’t mass defaults in case the interest rate spikes.
Note that this ruling does not affect Executive Condominiums that are not yet fully privatised as they are still considered private developments. The 10-year rule applies if trying to sell to foreigners.