Effect of 50-Year Home Mortgage Bank Loans on HDB Flats

Mr Chen Show Mao asked the Minister for National Development what likely effect will 50-year home mortgage bank loans have on the prices, financing and affordability of HDB flats.

Mr Khaw Boon Wan: Fifty-year housing loans will cost the borrowers more, besides imposing a longer term financial burden on them. While such loans offer lower monthly instalments, the borrowers will end up paying higher interest in total, and servicing the loan past their retirement when they no longer have a steady income.

While some borrowers may be attracted by the lower monthly instalments, we do not expect 50-year housing loans to be popular. Their impact on the public housing market is unlikely to be significant.

HDB does not offer 50-year loans as they are not necessary. We price BTO flats to be affordable, well within one working lifetime. There is no need for working couples to take 50-year mortgages to buy HDB flats. The maximum loan tenure for HDB housing loans is 30 years, with an age ceiling of 65. In practice, the average loan tenure taken up is lower, at 24 years. At this loan tenure, the monthly housing loan instalment constitutes about a quarter of the monthly household income, and can be mostly paid for using CPF contributions, with zero or minimum cash outlay.

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