Home Loans Boost Growth In bank Lending To 9-Year High

Source : The Straits Times, Sat, Sep 01, 2007

A PICKUP in housing loans has spurred the biggest rise in domestic bank lending in Singapore in more than nine years.

Bank loans climbed 10.9 per cent in July from a year earlier, to about $211.1 billion.

This is the fastest rate of monthly loan growth since January 1998.

According to monthly data released by the Monetary Authority of Singapore (MAS) yesterday, one of the drivers behind the multi-year record loan growth was the anticipated take-off in mortgage lending.

Borrowing by homebuyers was up 8.1 per cent in July, accelerating from 6.9 per cent in June, as the property boom in the Republic gradually translated into a higher take-up in home loans.

Home loans make up the majority of Singapore banks' consumer loans.

However, this segment had previously stayed sluggish for several months despite the Singapore property boom.

In the 11 months to March, mortgage growth in Singapore had remained under 3 per cent even though home sales surged.

A key factor for this is the popularity of deferred payment schemes offered by developers.

Such plans allow homebuyers to delay paying the bulk of a new home's price for up to a few years.

As more residential projects approach completion, growth in home loans is expected to accelerate even further.

Meanwhile, another facet of Singapore's property boom is also contributing to banks' healthy loan growth.

Borrowing by the building and construction industry continued to surge in July, increasing by 18.9 per cent, albeit at a slower clip than June's 20.8 per cent.

While Singapore's lenders enjoyed roaring business from builders and homebuyers, the manufacturing sector was another story.

Loans to manufacturers fell year-on-year for the fourth consecutive month and was down 1.6 per cent in July.

On the other hand, loans to the transport and communications sector - a relatively small segment - jumped by 61.2 per cent in July.

There was also a marked rise in banks' loans-to-deposits ratio in July.

The ratio, which reflects the extent to which banks are lending available funds, had been falling steadily to below 0.68 in May, before picking up in June. In July, the ratio was about 0.69.

Nevertheless, deposits still surged at more than double the pace of loans.

In July, total deposits by non-bank customers rose 24.6 per cent from a year earlier to about $305.2 billion.