Singapore’s household and corporate debt situation resilient despite rising interest rates: Alvin Tan

SINGAPORE – The country’s household and corporate debt situation remains stable despite rising interest rates, Alvin Tan, board member of the Monetary Authority of Singapore (MAS), said in parliament on Monday (9 May).

The number of financially distressed consumers who have turned to banks for help is not high and has declined over the past year, said Mr Tan, who is also state minister for trade and industry.

He noted that the percentage of non-performing mortgages remained low at less than 1 percent over the past year.

“The MAS stress test suggests that the average household’s mortgage service ratio should remain manageable even in scenarios of significantly higher interest rates or lower incomes,” he said.

Mortgage service ratio refers to the portion of a borrower’s gross monthly income that is used to pay off home loans.

Mr. Tan added that the ratio of non-performing corporate loans also remained low at 2.6 percent.

“Again, the MAS stress test suggests that as interest rates rise, debt servicing by Singapore-listed companies is likely to remain manageable, with most companies having sufficient revenue to cover their interest expenses and cash reserves to provide buffers.”

He answered a question from Mr. Saktiandi Supaat (Bishan-Toa Payoh GRC) as to whether, given rising interest rates, there has been an increase in consumers seeking help with debt management and whether the government will introduce measures for consumers and businesses to they face short-term liquidity problems.

Mr Tan said the industry-wide credit easing measures have been gradually withdrawn in line with a broader economic recovery and a steady decline in the number of requests for assistance.

Introduced in March 2020, these measures were intended to help individuals and small and medium-sized businesses in the short-term as strict public health measures caused temporary liquidity difficulties.

Mr. Tan added: “Conversely, recent market-driven rate hikes have been accompanied by sustained income growth, mitigating their impact on most borrowers’ ability to service debt.

“Indeed, the deleveraging programs put in place during the pandemic are not intended to shield borrowers from the normalization of interest rates.”

However, Mr Tan added that a small segment of households, particularly those with higher levels of debt, may be more constrained by rising interest rates and should reach out to their lenders early to explore possible loan refinancing and repayment solutions.

He added that MAS has worked with national development and labor ministries, the Housing Board (HDB) and financial institutions to establish “standardized interventions” for financially troubled HDB owners in the event of late repayments.

This includes potential loan restructuring solutions, early referrals to appropriate social services and, in certain cases, assistance in finding alternative HDB accommodation if foreclosures are unavoidable.

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