FINANCING OF BANK LOANS ON MORTGAGED PROPERTY

Mr Heng Chiang Meng asked the Minister for Labour when the Central Provident Fund Board will permit a CPF member to use his CPF balance and/or contribution to finance an existing bank loan predicated on the mortgage of a property acceptable to the Board.

Mr Lee Yock Suan: Mr Deputy Speaker, Sir, at present a CPF member can use his CPF savings to service a mortgage loan which is obtained for the purpose of financing the purchase of a property. He is not allowed to use CPF savings to service mortgage loans obtained for other purposes.

Besides providing for retirement needs, the CPF Scheme also encourages home-ownership. Where loans are for the purchase of homes, both objectives are met. In other cases the loans are for purposes other than home-ownership. Allowing CPF funds to be used to service such loans would tantamount to releasing CPF funds for other uses.

In some cases property-owners have mortgaged their properties to raise funds for other purposes. A few may be facing difficulty in servicing their loans and would like to have access to their CPF savings to pay their debt. If the Government allows refinancing in such cases on grounds of hardship, the question is what constitutes hardship. In genuine cases of hardship, the property owners may, in any case, have to downgrade their properties. They could sell their existing properties and buy smaller ones instead, using their CPF savings. This option is open to them.

In the case of Singapore trustee shares and gold, it is not practical to disallow the refinancing of such investments with CPF funds. Such investments are easily traded. Somewhat different considerations apply to properties. The sums involved are much larger and the assets are relatively more difficult to buy and sell.

On balance, the Government has not decided to allow CPF savings for refinancing of properties. However, if necessary, this issue could be reviewed at a later date.

Mr Heng Chiang Meng (Jalan Kayu): Sir, may I remind the Minister that on 18th March last year, he gave the same answer and he did say that a more concrete conclusion would be given at the end of last year after a review. May I ask what is the conclusion of that review?

Mr Lee Yock Suan: Sir, I have just given him the result of the review. The result is negative, for the time being.