I refer to the article “DBS targets HDB flat buyers with new home loan” (Straits Times, Apr 1).
No more Housing Withdrawal Limits?
When I checked the CPF web site’s housing withdrawal limit calculators, I discovered that they no longer apply to HDB flats.
Until today, HDB resale flat buyers on bank loans were previously subject to restrictions on the use of CPF to pay mortgage payments, such as the 120 per cent of the purchase price or original valuation, whichever is the lower rule.
How many affected?
I understand that thousands of HDB owners have been affected by the withdrawal limits on the use of CPF over the years.
This may yet be another flawed policy which may have caused undue financial stress to thousands of families, over the years.
How many families have been affected by this policy?
How many may have lost their homes?
How come no public announcement?
Shouldn’t a public announcement be made immediately on this change in policy?
Refund cash by replacing with CPF?
For those affected who had to use cash instead of CPF to pay for their mortgage, will this policy be applied retroactively, so that they can use their CPF now to get the cash paid refunded to them, if they choose to do so?
Bank loan delinquency statistics?
As to “Ms Lui also noted that while there have been some cases of repossession, these are rare.
She encouraged bank customers to discuss options with the bank should their financial situation change. “We are here for the long term, and we want to help our customers. If our customers come to us, we can work out a six-month or 12-month plan to help them through difficult times,” she said”, one difference between a HDB Concessionary loan and a HDB bank loan, may be that there are no publicly available statistics, as to how many HDB bank loans have been in arrears or foreclosed, since banks were allowed to offer HDB loans from 1 January, 2003.
HDB had said in a newspaper forum reply that they do not have statistics on HDB bank loans or foreclosures, although a Parliamentary reply several years ago was able to give the delinquency statistics for HDB bank loans.
Still called Concessionary loan?
Since, HDB bank loan interest rates have always been below the HDB’s 2.6 per cent interest rate, isn’t is a misnomer and somewhat misleading to continue calling it a HDB Concessionary loan?
HDB loans financial assistance?
I understand that borrowers who have difficulty paying their HDB Concessionary loans can typically get financial assistance from HDB by way of paying nothing, interest only or reduced monthly mortgage payments for six months, or up to a year upon review.
They can also see their Member of Parliament (MP) for assistance.
Bank loans got financial assistance?
In contrast, what is the typical process for defaulters of HDB bank loans? Do banks apply their typical penalty interest rates and late payment penalties for HDB loans too, like their private property loans?
Why majority take HDB loans?
Perhaps some of the above are the reasons why the majority – “Last year, two-thirds of the 59,000 HDB home buyers took the HDB loan” – still take HDB Concessionary loans despite the higher 2.5 per cent interest rate.
10-year cap on interest at 2.5%?
With regard to “The POSB HDB Loan will have its interest rate capped at the Central Provident Fund’s (CPF) Ordinary Account rate, which is 2.5 per cent, for 10 years” and “However, when compared to other bank loans in the market, analysts says the new POSB loan starts at a higher interest rate.
But at higher %?
“It’s anywhere from 0.3 per cent to 0.6 per cent higher than what’s in the market rate, but the compromise is there is an interest rate cap at the CPF Ordinary Account level” (“POSB to offer new HDB loan option from April 1“, Channel NewsAsia, Mar 31) – the risk may be that mortgage interest rates may be persistently higher than the HDB Concessionary loan’s 2.6 per cent during the balance 20 years of a typical 30-year mortgage.
Risk of higher % in the future?
Although mortgage interest rates are at near historical lows now, one should note that they were over 10 per per cent in the early 1980s and I understand that historically they have averaged at around 4 per cent.
Weigh all the risks?
As a volunteer doing financial counseling, I have come across hundreds of families who lost their homes because they were unable to service their mortgage.
No April Fool?
Note: This is not an April Fool Day’s joke.
Leong Sze Hian
