Most flat buyers with HDB loans unaffected by tighter limit: Minister

Move is meant to dampen demand at higher end of resale market, says Desmond Lee

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The move to tighten the maximum loan that home buyers can take from the Housing Board is meant to encourage prudent borrowing and dampen demand at the higher end of the HDB resale market, said National Development Minister Desmond Lee.

The latest round of property measures, which kicked in on Aug 20, saw the loan-to-value (LTV) limit, or the maximum amount one can borrow from HDB to fund a new or resale flat purchase, reduced from 80 per cent to 75 per cent.

Explaining the Government’s move in a media briefing on Aug 20, Mr Lee said about a tenth of home buyers took out HDB loans exceeding 75 per cent of the flat price.

But they “disproportionately” bought larger flat types and paid higher prices for them, said Mr Lee.

This group of buyers was not insignificant. Depending on the flat type, the median buyer in this group paid between $20,000 and $60,000 more than other buyers who took loans of 75 per cent and below, he added.

“And so they are contributing to the overall higher prices in the HDB resale market.”

The move to tighten the LTV limit means that buyers will be allowed to borrow less than before – up to 75 per cent of the flat value, compared with 80 per cent before.

It also brings the HDB loan limit in line with that of mortgages granted by financial institutions, which remains unchanged at 75 per cent.