Among all the 10 rounds of cooling measures applied by Singapore government since 2009, this is the most powerful & effective “loan curb” measure. And how does it affect loan applicants?
- Income is reduced: Except for fixed monthly employment income, all other sources of incomes are given a haircut of 70% of reported income.
- Stress test interest is higher: The stress test rate is currently 3.5%. Before TDSR it was 2% or 2.5% depending on the bank’s internal guidelines.
- Loan tenure is shorter. Income weighted age is applied in TDSR calculation whilst younger income earner’s age was the base for calculation before TDSR. A kind of “combination” of all applicants’ age is applied currently. The age will lean more towards the higher income applicant, who is normally older. The cap of max loan tenure is capped at age 65 if first housing loan is more than 60% and this is 5-10 years shorter than before TDSR era.
- Commitments to be considered are more: This is very obvious for credit card bills. Under TDSR requirement, minimum amount due is required whilst in the past, the commitment was considered zero if the card is paid in full and on time.