11 February 2014

MAS to revise TDSR Rule - FEB 2014

The MAS has announced certain exemptions in the implementation of its TDSR threshold. These apply mostly for owner-occupied properties, and helps buyers who have received their option to purchase (OTP) before 29 Jun ’13. 

Under the revised rules,
i) Owner-occupiers will be exempt from the TDSR threshold of 60% when refinancing loans for properties bought before 29 Jun ’13.
ii) MAS will exempt application of recent threshold changes to the mortgage-servicing ratio (MSR) and the max loan tenure limit for owner-occupied refinancing, as long as the OTPs were dated before the implementation of those rule changes.
iii) For investment properties, MAS will allow a transition period from now until 30 Jun ’17, for borrowers to be exempt from TDSR when refinancing, provided they commit to a debt reduction plan and have purchased the property before 29 Jun ’13.

The exemptions will reduce the incidence of TDSR-imposed fire sales, prevent forced selling and allows for a soft landing. The revised rules also allow owners who need to refinance their property, to hold on to the properties for at least four years to avoid paying Seller Stamp Duty, while reducing their debt gradually.
In my own opinion, this could be a good move for certain home owners to upgrade or purchase or just simply refinance without the hassle. And it may improve current market sentiment as the total volume transacted in past few months was very discouraging.

So, it could be the first move for the government to reverse the cooling measurement started since few years back and we may have better opportunities in investing in real estate counters. We may started to select some counters that fall under our searching criteria and hold on to it amid the speculation that interest rate may started to pick up soon as we already noticed that some banks offering about 2.0% FD rate.

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