Published May 16, 2007

More are taking bigger home loans from banks


(SINGAPORE) Rising prices for homes lead inevitably to bigger borrowing - which is good news for the banks at least.

After three years of decline, when demand for new loans was tailing off, banks now see one of their biggest money-spinners - mortgages - on the verge of taking off.

Preliminary data from the Credit Bureau show that much of the new lending is going to people buying expensive property. Borrowers seeking loans of at least $1 million are increasing in number faster than those seeking smaller loans.

The Credit Bureau in Singapore shares information on borrowing between its member banks, credit card companies and other financial institutions.

At United Overseas Bank, the head of loans, Kevin Lam, said: 'UOB's average home loan size used to be about $500,000, currently it's $750,000.'

Since hitting a high of 20 per cent growth in February 2004 - roughly a year after the HDB home loans market was opened up - growth in housing loans has been slipping. By last year the market was still growing, but only just, having slipped to a 10th of its peak level. For much of 2006, housing loans grew at a tepid 2-3 per cent, despite the strong economy and apparently booming property market. Mortgages generally make up about a quarter of the total loan portfolios of local banks.

Part of the reason was rising interest rates which went from below one per cent in 2003 to as high as 4 per cent last year, prompting borrowers to repay as much of their outstanding mortgages as they could.

Other factors cited were the huge number of en bloc sales which resulted in mortgages for entire developments being repaid, and the popularity of deferred payment schemes offered by developers. But things are looking up for the banks. In March, the latest data available, housing loans grew 3.6 per cent, the strongest pace in a year. This followed the 2.7 per cent in February, 2.5 per cent in January and 2.2 per cent in December 2006.

Other trends such as borrowing bigger amounts and individuals having more than more mortgage are also being noted.

Tan Chia Seng, Citibank Singapore business director, said: 'There has been a noticeable increase in bigger ticket (home loan) sizes. The average ticket size is 33 per cent more over the last 12 months.'

The growth rate of big borrowers - those with a mortgage balance in excess of $1 million - continues to outpace those with less than $1 million, according to the Credit Bureau figures.

'While this is in part due to a lower base factor, we believe it also reflects fast rising property prices,' said Ng Wee Siang, BNP Paribas analyst.

Higher value mortgages now make up 5.8 per cent of total number of mortgages versus 5.4 per cent a year ago or 5.1 per cent two years ago, he said. As at February, the date for which figures are available, 4,097 people have mortgages in excess of $1 million, up 31.6 per cent from a year ago. The number of people with mortgage balances of less than $1 million was 243,406, up 9.1 per cent.

Increasingly, people have two or more mortgages, said Mr Ng.

Although in February, data showed only 1,350 existing borrowers taking on new mortgage accounts, this followed some 2,000 people taking out another mortgage in January. Since May last year, monthly additions of existing borrowers with new mortgage accounts have hovered above the 1,800 level, above the mean 1,447.

According to Mr Tan of Citibank, about one in 10 mortgage customers are applying for a second or third mortgage for multiple properties.

'Previously very rarely do you have customers applying for a second mortgage,' he said, although he does remember this happening in 2001 and between 1994 and 1996, during the previous property booms.