Efforts to Catalyse Reverse Mortgages for Private Housing
Prime Minister's OfficeSpeakers
Summary
This question concerns Mr Kwek Hian Chuan Henry’s inquiry into efforts to catalyse private housing reverse mortgages and the commercial guidelines governing their interest rates. Deputy Prime Minister Tharman Shanmugaratnam stated that financial institutions may offer these products, though past lack of demand led some to discontinue them. He noted that mortgage equity withdrawal loans under 50% of property value are exempt from the total debt servicing ratio framework to help retirees monetise assets. Other options include property rental or schemes like the Housing and Development Board’s Lease Buyback Scheme and Silver Housing Bonus for eligible flat owners. The Government remains committed to reviewing policies that support various housing monetisation methods to meet the retirement needs of Singaporeans.
Transcript
3 Mr Kwek Hian Chuan Henry asked the Prime Minister (a) whether there are any efforts to catalyse reverse mortgages for private housing; and (b) whether there are any guidelines and laws that govern reverse mortgages for private housing, including the level of interest charged for reserve mortgages.
Mr Tharman Shanmugaratnam (for the Prime Minister): Financial institutions (FIs) are allowed to offer reverse mortgages. In fact, some FIs did offer reverse mortgages in the past but ceased doing so when they found a lack of demand.
The terms for reverse mortgages, including applicable interest rates, are set on a commercial basis, taking into account factors, such as cost of funding and credit risk.
The Government has been looking at options to help Singaporeans better monetise their housing assets. For example, MAS announced in March 2017 that mortgage equity withdrawal loans need not be subject to the total debt servicing ratio (TDSR) framework if the loan amount is less than 50% of the market value of the property. This will help retirees – many of whom would have paid up most of their outstanding housing loan – monetise part of the value of their property.
There are alternatives to reverse mortgages or mortgage equity withdrawal loans. For instance, a property owner can choose to let out his property or a room for rental income. Eligible HDB flat owners may also monetise or right-size their flats through HDB's Lease Buyback Scheme or Silver Housing Bonus respectively.
The Government will continue to review its policies to facilitate monetisation options that are relevant to meet the retirement needs of Singaporeans.