MORTGAGE LOAN DEFAULTS

Mdm Claire Chiang See Ngoh asked the Minister for Finance if he will provide more information about the rise in private residential mortgage loan defaults from April to September 1998 and whether this will become a worrying trend; and how the Government will tackle this problem, particularly in view of the fact that any cut in Central Provident Fund contributions may exacerbate the problem.

Dr Richard Hu Tsu Tau: There has been an increase in non-performing housing loans over the year, ie, loans on which borrowers have not been servicing their instalments for 3 months or more. Such loans amounted to 1.7% of the banks' total number of housing loans as at end-August 1998 compared with 1.0% as at end December-19971. The default rate is not as yet worrying, but the MAS is monitoring closely the trend.

1 These estimates are based on data from 10 leading commercial banks, accounting for 90% of all housing loans extended by commercial banks.

The proposed cut in CPF contribution rate would have some impact on mortgage loan repayments. However, the impact will be mitigated by both the banks and the Government. Just like the HDB will reschedule the loans for those purchasing HDB flats and shops, banks can be expected to reschedule the private property loans as far as possible and recall the loans only as a measure of last resort. As announced by the Prime Minister in his recent National Day Rally Speech, in the event the Government decides to cut CPF contribution rates, the Government will be prepared to help property owners in their monthly housing loan repayments through a bridging loan scheme. The scheme would offer loans to make up for shortfalls in housing loan repayments arising directly from the CPF cut. The Government is currently studying the terms and conditions and the implementation details of such a scheme, and will announce it at an appropriate time.