Identifying and Supporting Lower-income HDB Borrowers at Risk of Negative Cash Flow Through Loan Restructuring, Employment and Temporary Financial Support
Ministry of FinanceSpeakers
Summary
This question concerns the estimated number of lower-income HDB borrowers facing potential negative cash flow under MAS stress tests and the support measures available to prevent arrears. Mr Yip Hon Weng asked for the specific household figures and how MAS, banks, and agencies work together to provide early loan restructuring, employment, and financial assistance. Minister Gan Kim Yong, speaking for the Prime Minister, stated that the vulnerable 1% equates to roughly 4,000 households under a severe adverse scenario, rather than households currently under stress. He explained that financial institutions monitor borrowers to engage those under stress early with tailored assistance, while HDB flat owners can approach HDB or banks for loan restructuring. Furthermore, HDB can refer borrowers to social service agencies, and those facing repayment difficulties can approach Credit Counselling Singapore for financial counselling and debt management guidance.
Transcript
1 Mr Yip Hon Weng asked the Prime Minister and Minister for Finance given MAS' finding that one percent of borrowers, mainly lower income, middle-aged HDB residents, could face negative cash flow with savings below six months of the stress-tested income shortfall (a) how many households does this represent; and (b) how will MAS work with banks and agencies to identify them early and provide loan restructuring, employment and temporary financial support before arrears arise.
Mr Gan Kim Yong (for the Prime Minister): The Monetary Authority of Singapore's (MAS') latest financial sector stability stress test estimates that the vast majority of borrower households with housing loans from financial institutions (FIs) would remain resilient under a severe adverse scenario involving a significant rise in mortgage rates, and a sharp reduction in income. The results also indicate that under the severe shock scenario, around 1% of these borrowers could face cash shortfalls, whereby their overall monthly expenditures exceed income, and they are unlikely to have sufficient savings to cover these monthly shortfalls. This vulnerable group is estimated at around 4,000 households. The share of these vulnerable households has remained relatively stable across the annual stress test exercises. These numbers are not estimates of households currently under stress, but of those who could come under stress if a severe adverse shock scenario were to come to pass.
MAS and other agencies have established several avenues to support borrowers facing or at risk of repayment difficulties.
FIs monitor borrowers' repayment performance and engage those showing signs of financial stress early, offering assistance tailored to borrowers' circumstances. Borrowers who anticipate difficulty making repayments should approach their lenders early.
For Housing and Development Board (HDB) homeowners who fall behind on repayments, they can approach HDB if they obtained HDB financing, or banks if they obtained bank financing, to discuss loan restructuring. HDB may also be able to assist with referrals to appropriate social service agencies.
Borrowers already in debt repayment difficulties may also approach the Credit Counselling Singapore, which provides financial counselling and debt management guidance.
Given that the macroeconomic outlook remains highly uncertain, including for global and domestic interest rates, households should continue to exercise prudence in taking on debt and maintain adequate savings buffers against economic uncertainties.