Changes in Average Loan-to-Value Ratio and Percentage of Mortgage Loans Used for Owner-occupied versus Investment Properties since 2008

Mr Chua Kheng Wee Louis asked the Prime Minister (a) since the 2008 Global Financial Crisis, what have been the changes in the (i) average Loan-To-Value (LTV) ratio and (ii) percentage of mortgage loans being used to finance owner-occupied properties as against investment properties; and (b) in comparison to these changes, what is the Government’s current assessment of the risk to a higher LTV ratio through the downside to residential property valuations.

Mr Tharman Shanmugaratnam (for the Prime Minister): The average Loan-to-Value (LTV) ratio 1 has moderated in recent years, with property values significantly exceeding their loan values. The available data shows that the average LTV ratio increased from 44% to a peak of 54% between 2011 and 2017, before steadily declining to 44% again as of Q2 2022.

The share of mortgage loans for financing owner-occupied properties increased from 74% in 2008 to 79% in 2022. Correspondingly, the share of mortgages for financing investment properties fell from 26% to 21% over the same period.

The low LTV ratio provides financial institutions (FIs) and existing borrowers with a good buffer against falling property valuations. However, with interest rates rising and increased uncertainty on global growth prospects, I urge households to exercise prudence and ensure that they are able to service their debts when taking on long-term financial commitments including property purchases. To mitigate such risks, the MAS has tightened credit rules over the past year to curtail the loan amount that new borrowers can take out, including a lower Total Debt Servicing Ratio (TDSR) threshold.

Note(s) to Question No(s) 56:

1 This refers to LTV ratios averaged across outstanding mortgage loans granted by financial institutions.