SINGAPORE: The risks to households in Singapore are expected to be contained, but the sector should continue to exercise prudence, the Monetary Authority of Singapore ( MAS ) said on Wednesday ( Nov 27 ).
According to the regulator and central bank’s monthly fiscal stability review, households have solid financial buffers, and stable income growth and mortgage rates have been helped by debt servicing ability.
Additionally, it noted that households ‘ liquidity levels have improved, with increases in income and deposits outpacing home liabilities overall.
The personal housing market has been stabilising, so property price volatility danger may be contained.
” However, given the heightened political risks and trade conflicts in the macrofinancial environment, families should continue to exercise caution in their financial control”, MAS said.
HOMEHOLDS ARE QUICK TO SERVICE DEBTS.
Though household debt increased in the past month, economic assets grew faster, the statement said.
Cover loans, which are secured by home collateral, account for about three-quarters of all household debt.
In comparison to the same time last year, excellent housing mortgages increased by 1.6 % in the third quarter. Borrowers ‘ ability to refinance their existing mortgages was generally accounted for by higher interest rates.
Families continue to be able to pay their debts.
According to MAS, a stress test on households, assuming an immediate increase in mortgage rates to 5.5 % and a 10 % increase in income are both evidence that debt servicing capacity is sufficient to withstand adverse shocks.
In such a situation, a small number of highly leveraged loans would be in danger, while over 90 % of households would be able to pay their mortgages. However, these loans may not have any simulation-compliant cash buffers or Central Provident Fund benefits.