By Romesh Navaratnarajah: United Overseas Bank's (UOB) 50-year home loan, the longest loan tenure in Singapore, will not affect Singapore's public housing market since it is unlikely to be popular, highlighted the Ministry of National Development (MND).
"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," said the Ministry in a written response to Workers Party MP Chen Show Mao's query on the possible effect of the loan on affordability and financing of HDB flats.
After UOB launched the 50-year loan last month, it was criticised by the government who warned borrowers against taking up the loan as it would be a longer-term financial burden.
The Ministry also revealed that the housing board does not offer such loans since it is not needed as BTO (Build-to-Order) flats are affordably priced and can be paid for within one working lifetime.
"There is no need for working couples to take 50-year mortgages to buy HDB flats," it said.
Meanwhile, HDB's maximum loan tenure is 30 years; the age ceiling is 65, while the average loan tenure taken up is 24 years. At this rate, the instalment comprises about 25 percent of monthly household income and most of it can be paid for using CPF contributions with zero or little cash outlay, noted MND.
At the same time, Kenneth Ng, Head of Research at CIMB, said that the 50-year loan is a marketing gimmick by lenders to obtain loan volume in a market where growth is falling. Related Stories: UK lenders in mortgage war
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