The unique feature for mortgage particularly housing finance in Singapore is the role of the
mandatory saving scheme, Central Provident Fund (CPF). The home purchases in Singapore is mainly financed through the use of Central Provident Fund (CPF). This CPF was introduced in 1 July 1955 as the national funded pension scheme by the Colonial British Government. The relaxation of the CPF regulation has allowed residential property purchases in mid 1970s for public housing and early 1980s for private property. The total amount of withdrawals for housing has increased by about 14 fold in its peak in 1999 as compared to the year 1981. According to the Singapore Census 2000, the scheme has become very successful in promoting home ownership whereby 92% of the Singaporeans own a home.
Home Ownership In Singapore
Singapore’s home ownership is segmented into two types like private homeownership and public home ownership. Among them the public home ownership sector is the dominating sector accommodating 81.3 percent of total households from low income to upper middle income groups.
The public housing system is strictly under the authority of the Housing Development Board (HDB), which covers duties such as housing production, housing management, housing finance and formulation of housing policies.
The public home ownership sector is divided into three sub-sectors as follows
The public new housing sector.
The HDB resale market.
The HDB executive condominium market.
In the new housing market, the dwellings are newly built and are sold at subsidized prices.
The private owner-occupier housing market accommodates less than 10% of the total number of households. There is an indication of rising private housing stock, which increased from 14% in 1989 to 18.1% in 1999. The private sector receives comparatively less subsidies from the Government and thus is less regulated.
Financing System In Singapore
There are mainly two types of financing systems in Singapore, which are as follows:
The HDB public finance sector
The commercial finance sector.
HDB flats owners can enjoy the subsidized mortgage rates if they are eligible for the subsidized loans. The HDB can grant a subsidized loan to first time homebuyers and also to second time homebuyers who upgrade to another HDB flats. The private home owners and homeowners who do not qualify for the subsidized loan will, however, have to secure their financing from banks and financial institutions.
Interest Rates On Mortgages In Singapore
Mortgage Types
Tenure
Interest Rate %
Fixed rate mortgage
1 Year
1.61
2 Year
2.72
3 Year
2.89
Beyond
3.75
Flexible Rate Mortgage
1 Year
1.59
2 Year
2.38
3 Year
2.92
Beyond
3.40
Loan To Value Ratio
Max Tenure of Loan
80%
30-35 Years
In Singapore the average of the mortgages rates are offered by HSBC, Hong Leong Singapore Finance, NTUC, OCBC, DBS, May Bank and United Overseas Bank Group in October 2003.