COVID-19 Special: Banks approve 90% of applications to defer mortgage payments

Banks have approved about nine in 10 applications by property buyers to defer the payment of their mortgages.

Quote from The Straits Times

The high approval percentage for property mortgage payments by the banks sends a very clear signal that our Government is not going to let our property market go into freefall, or come even remote close to that.

I briefly covered this topic in an earlier blog post when the Government first announced this package.

What type of property owners are eligible? Property owners who purchased a property before 6 April 2020, and they must not be in arrears for more than 90 days as at 6 April 2020. The applicants also do not need to show that they had been hit by the COVID-19 fallout to obtain approval. Refer to this Straits Times link for more info.

In an unprecedented move by the Monetary Authority of Singapore (MAS), property owners do not even need to show their household balance sheets to qualify for this deferment package. That could also mean, out of the 31,300 property owners who applied for deferment, not all of them are genuine cases.

Some of these owners would perhaps want some form of assurance. What’s more interesting to note is that, the applicants are much lesser than I would have expected. There was an 2019 article that reports Singapore as the number one country when it comes to saving. I have also met and assisted many, many property buyers who chose to leverage well below their max loan. Our people can be quite prudent, especially property purchases.

Now, how does this deferment work out for property owners? Basically the applicant can defer either the principle, or both the principle and interest payments (full property loan) until 31 December 2020.

What happens if the property owners are still unable to pay the property instalments by then? Disclaimer, I was told the following information by a colleague but am unable to confirm this, according to the Investopedia, the industry standard is to give 90 days for the property owner to pay up the loan. Only in the fourth month, the banks will apply to take legal action to foreclose and repossess the property and put it up under bank auction sale subsequently.

If any property owners are in financial destress or lost their jobs due to COVID-19, they in fact have 6 + 3 months to raise money to pay the instalments. In nine months, a replacement job should have already been found, they could take advantage of favourable interest rates, and the peak of COVID-19’s infection would well been over and our economy enroute to recovery. And my advice for some of these property owner who want to be prudent is to take action to downgrade from their private property and unlock their cash proceeds within the 6 months deferment period.

What does all this mean to us as property buyers and owners? As mentioned at the start of this entry, our Government is not about to let our property market be too adversely affected by the virus situation. All things being equal, our Government is armed with an arsenal of cooling measures to prevent the property market from appreciating too fast, they are also prepared to implement policies or perhaps even relax some of these cooling measures to nudge the property price trend in the right direction.

They have done it before back in 2017. RET

Got a question? Contact Reuel Eugene Tay at +65 9833 6450 for a real estate discussion.


Source:

The Straits Times, Banks approve 90% of applications to defer mortgage payments amid Covid-19, 26 May 2020
https://www.straitstimes.com/politics/parliament-banks-approve-90-per-cent-of-applications-to-defer-mortgage-payments-amid-covid

The Straits Times, Individuals can apply to defer property loan, 31 Mar 2020
https://www.straitstimes.com/business/banking/covid-19-individuals-can-apply-to-defer-property-loan-insurance-premium-payments

TODAY Online, Seller stamp duties reduced, 10 Mar 2017
https://www.todayonline.com/singapore/govt-lower-holding-period-residential-property-sales-sellers-stamp-duties

Investopedia, Default on loans, 30 Mar 2020
https://www.investopedia.com/terms/d/default2.asp

Investopedia, Top 10 countries who save the most, 13 Jun 2019
https://www.investopedia.com/articles/personal-finance/022415/top-10-countries-save-most.asp

Published by Reuel Eugene

Real Estate Advisor | Researcher | Asset Progression | Creative marketing

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