CENTRAL PROVIDENT FUND ACCOUNTS (Payment of mortgages)

Mr Yeo Guat Kwang asked the Minister for Manpower, with the proposed adjustments to the contribution rates to the Central Provident Fund's Special and Medisave Accounts, whether there is any plan to help those who have not enough savings in their Ordinary Account to pay for their mortgages.

The Minister for Manpower (Dr Lee Boon Yang): Mr Speaker, Sir, the CPF Board has consulted HDB on the impact of the total CPF allocation rates on the affordability of HDB flats prior to the announcement of the changes (I refer to the changes for the Special Account and the Medisave Account contribution rates). Sir, the conclusion is that the changes to the Special Account and Medisave allocation will not have a significant impact on first time HDB buyers. The vast majority of the first time 4- and 5-room flat buyers will still be able to service their entire mortgage instalments from their Ordinary Account contributions. Some first time 3-room flat buyers may need to pay a small amount of their mortgage instalments in cash. This amounts to typically less than 10% of their monthly household income and is manageable for most households. Upgraders will also face minimal impact as they can use the proceeds from the sale of their earlier flat to offset the price of their new flat.

Nevertheless, there are measures in place to help CPF members who have difficulty paying for their mortgages. The various housing assistance measures, which were introduced to help members affected by the cut in employers' CPF contribution in January 1999, are still in place and will remain so until the CPF cut is fully restored.

Sir, in addition, the Government had announced that from 1st October 2000, all young couples buying a 4-room HDB flat can pay their 20% downpayment in two instalments. The Government has also made available an additional $26 million per year to help low-income families buy their first flat or upgrade to a bigger flat under the Special Housing Assistance Programme (SHAP), which the Minister of State for National Development mentioned earlier on in response to Question No. 8.