Number of people with multiple home loans up 64% in June as applications surge.
For thousands in Singapore, a single home - or a single loan - is no longer enough.
Riding the property boom, with its promise of huge gains, the number of people with multiple home loans soared to 38,520 in June this year.
This represented a 64 per cent jump from 12 months ago. In June 2006, the number of people with two home loans or more stood at just 23,541, according to the Credit Bureau (Singapore) Pte Ltd (CBS), which released data on property loans for the first time yesterday.
In tandem with rising property prices, new home loan applications surged to 17,323 in May. If the past 30 months are a benchmark, then the average month sees just 10,000 new home loan applications.
Also, over the past two-and-a-half years, an average of 4,000 applications have been approved each month. But in May, a total of 4,856 applications were approved, suggesting that while banks had stepped up the pace of approvals, the applications had flooded in even faster.
Loan approval data lags applications as it refers to disbursements which could be a few months later or even as long as two years down the road for borrowers who bought on deferred payment schemes.
June saw 4,794 approvals against 16,017 applications. The breather that the property market then took was echoed in the number of new loan applications, which fell to 13,870 in August.
Property loan approvals increased 12 per cent in June 2007 to 50,514 from a year ago.
Explaining the relatively low rate of approvals compared to the applications flowing in, Mark Rowley, CBS general manager, ventured that people making ‘multiple applications’ could have something to do with it - as could the credit policy of banks.
And while there has been some anecdotal evidence of banks tightening credit, he said it was too early to say if the low rate of approval was a result of that.
Said Helen Neo, head of consumer banking of Maybank in Singapore: ‘A home loan application may be rejected if the applicant’s repayment ability is in doubt taking into account his overall financial commitments.’
Tan Chia Seng, Citibank Singapore business director, said that in the last 12 months, there had been a noticeable increase in big ticket mortgages and multiple home loan borrowers.
‘At Citibank, we always take a prudent approach towards mortgages,’ said Mr Tan.
‘For multiple home loans, it is particularly important to consider the applicant’s aggregate servicing capability for all his loans, especially his home loans,’ he added.
He ventured that one possible reason for the low approval rate could be that the applicants’ aggregate servicing capability for all his loans has fallen below an acceptable level.
‘If the applicant has a disproportionately high debt-servicing ratio, a prudent bank may not approve his application for a second or third home loan,’ said Mr Tan. ‘In our case we have been declining loans to applicants where the debt-servicing ratio exceeds our comfort level.’
CBS said the data, which have been compiled over the 30 past months and used to develop a property loan index, show a hunger for credit to finance properties under the current property boom.
The index showing credit hunger climbed to a high in May, 71 per cent above the baseline or 17,323 new loan applications. Single-day sellouts at various property launches also repeatedly made the headlines.
Home loan approvals jumped 23 per cent in May to 4,856. In April, the number stood at just 3,967.
The good news is that along with the relentless climb in property prices, the delinquency rate, or the proportion of borrowers behind with their home loan instalments, is falling.
CBS also charted a delinquency index which shows the percentage of people being late in payments has been declining from the average delinquency rate of 2.35 per cent to just 2.04 per cent as of June 2007.
That works out to 5,448 delinquent borrowers out of the total 266,512.
From a credit risk perspective, it is very positive, said CBS’s Mr Rowley.
‘We will always focus on delinquency as the indicator - it’s low at this point,’ he said.
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