Sunday, July 20, 2014

Overdue mortgage payments on the rise!


A report in the ST said that more private home owners are not making their mortgage payments on times. This is according to figures from the Credit Bureau of Singapore. 

·         The number of borrowers with delinquent mortgages hit 4,186 in May, up 20% from the 3,340 a year earlier.

·         Delinquent borrowers comprised 0.82% of private home loans in May, up from 0.7% in the same month last year.

·         Banks wrote off six mortgages in the first five months of the year, a touch up from the five bad loans in the same period last year. 

Banks typically consider accounts with payments that have been overdue for 90 days or more as a defaulted loan.
 
Although the percentage rise in the number of delinquent accounts was more than the increase in total private home loans, experts note that the figures are not yet alarming.
 
The increase on the number of  overdue payments may be due to highly leveraged individuals who took out large loans before the TDSR was introduced. Another possible reason could be the slight rise in the overall jobless rate, which increased from 1.8% in December last year to 2% in March.
 
Mr Song Seng Wun, regional economist at CIMB, pointed out that it could be a reflection of the correction in the property market.
 
The number of private condominium homes completing this year is expected to hit 17,000, up from 13,150 last year.
 
As tenants have more options amid a softening market, owners who bought units expecting to finance them with rental income could find themselves burdened instead, Mr Song said.
 
Moreover, mortgages are almost fully drawn down upon the completion of a new property, bumping up the monthly payments, he noted.
 
This underlines the increasing number of properties that were put up for auction by banks.
 
Earlier reports showed that 42 mortgagee sale properties went to auction in the second quarter, the highest since the third quarter of 2009, when 63 homes were up for a fire sale.
 

On a related note, the wife and I have noticed that the interest rate have been creeping up over the past 9 months. We have a mortgage that is currently pegged to the 3-month SIBOR. It was at 1.1513% in December last year, then went up to 1.1520% in March 2014 and the last revision in June 2014 saw the rate inched up further to 1.1537%. It will be interesting to see what the September rate is gonna be.

We also realised that the bank notification for interest rate revisions these days only provide you with the new rate. So unless you bother to keep track, you may only realised it when your mortgage repayment starts showing significant increase.

Maybe our local banks can start issuing advice that says "Your interest rate will change from  xxxx to yyyy from ..." for better transparency and clearer information?


And finally, we are keeping our fingers crossed that this post will not get spammed by all them "loan companies" promising to give out all kind of loans at 3% interest rate (no mention of whether it's per year or month) without stress and can supposedly dispense the loan to you within 2 days!
 
 

2 comments:

Anonymous said...

Any thoughts on the effect of SSD introduced earlier past maturity date ?
Will there be more seller in the resale market ?

The Folks @SG PropTalk said...

Anonymous (20/7/14, 7:38PM):

Before we try to answer your question, the wife and I must emphasize (again) that we are no experts.

The last revision on SSD was made on 13 Jan 2011, with duty payable for properties bought on/after 14 Jan 2011 within 4 years from date of purchase. We will see the first batch of new homes that fulfil the 4-year tied-down period in January of next year.

So how many units are we talking about here?

Previous estimates from property consultants have indicated that close to 20,000 new completed units will hit the market in 2015. Of these, about 30% will still be subjected to SSD. Despite so, we are talking as many as 14,000 of potential resale units that can be sold with zero SSD.

We believe that 2015 will be an interesting year to watch in terms of prices for resale homes, as the number of sellers in the resale market is set to increase.

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