Alvin Tan on household debt and mortgage delinquency

The household debt situation in Singapore remains healthy, although there is a need for prudence in borrowing as interest rates are expected to rise in the coming years. The overall debt servicing ability of households has remained manageable, with the medium total debt servicing ratio (TDSR) at 43 per cent last year. This is well within the TDSR threshold of 55 per cent, which was tightened last year as part of Singapore's property cooling measures. The credit profile of mortgages is still healthy, with the proportion of delinquent mortgages at less than one per cent. Household net wealth grew even through the pandemic, with household assets growing faster than household debt, and households' liquid assets such as cash and bank deposits continued to exceed the total liabilities in aggregate. Minister of State for Trade and Industry Alvin Tan said this in reply to MPs' questions in Parliament on Monday (Apr 4). He said most households should be still able to service their mortgages as Singapore's domestic interest rates pick up. Mr Tan said this financial resilience of households to service their mortgages reflects the effects of measures that the Monetary Authority of Singapore has put in place over the years. The central bank's stress tests suggest that the median household mortgage servicing ratio will remain manageable even under scenarios of significantly higher interest rates or low incomes. Mr Tan urged borrowers to exercise caution in their home purchases to avoid having to cut back on other household expenditures if interest rates rise sharply.