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HELP WITH MORTGAGE PAYMENTS
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| 6. |
I can understand
that many homeowners are concerned about the
impact of the CPF changes on their mortgage
payments. Nobody welcomes lower CPF contributions,
and some homeowners will have genuine difficulties
making ends meet. Several MPs - Mr Zainul
Abidin, Mr Nithiah Nandan, Mrs Lim Hwee Hua
- have raised this concern. |
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| 7. |
Let me assure the
House the great majority of homeowners can
cope with the CPF changes, either on their
own, or perhaps with a little bit of help
from the Government. We have encountered and
dealt with the same problem before. In 1999,
when we cut the CPF by 10 percentage points,
we accompanied the cut with measures to help
people who would not have enough to service
their mortgages. Very few people actually
needed the extra help, but the schemes gave
comfort and reassurance to many. This time
the problem should be smaller, as the cut
is only 3 percentage points. Nevertheless,
we will make sure that help is available to
everyone who needs it. |
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| 8. |
We have studied
how many homeowners with mortgages will be
affected. 577,000 CPF members use their CPF
for mortgages. Of these, currently about 218,000
(38%) experience shortfalls, i.e., their monthly
CPF contributions are less than their monthly
mortgage payments. With the CPF changes, the
number will go up to 294,000 (51%) - or about
76,000 (13%) more. The average shortfall will
be about $350 per month. Most of the additional
76,000 home owners have quite small shortfalls
- less than $200 per month. It is the higher-income
group who have the larger shortfalls, because
their contributions to the OA are limited
by the CPF salary ceiling. |
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Table 1 : Number of
CPF members with monthly contributions less
than monthly mortgage payments
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| 0-100 |
64,976
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93,047
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28,071
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| 101-200 |
43,176
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58,782
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15,606
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| 201-300 |
29,365
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38,791
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9,426
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| 301-400
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20,121
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26,100
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5,979
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| 401-500 |
15,480
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18,017
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2,537
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| 501
& above |
44,732
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59,021
|
14,289
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| Total |
217,850
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293,758
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75,908
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| 9. |
However,
a shortfall does not necessarily mean a problem.
Many members with shortfalls will be able
to cope, because their monthly contribution
to the Ordinary Account (OA) is not their
only source of financing. They may top up
their mortgage payments using their personal
savings, from their take home pay, or by dipping
into their accumulated OA balances. This is
what 218,000 CPF members now do. After the
CPF cut, their numbers will increase to 294,000,
but most of these members have sizeable balances
in their CPF OA, especially the older ones.
About two-thirds of them have OA balances
which can cover their shortfalls for two years
or longer. |
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Table 2 : Ability to
cover shortfalls using accumulated OA balances
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| 10. |
But, unavoidably,
a small proportion of homeowners will not
have enough in their OA, and may not have
enough cash incomes to make up the shortfall.
We are taking several steps to help this minority
group. |
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| 11. |
Firstly, in designing
the CPF changes, we have made adjustments
to lessen the impact on borrowers. As the
PM explained yesterday, with the lower overall
contribution rate, and the change in withdrawal
rules at 55, we have lowered our targets for
the Special Account (SA) and Medisave Account
(MA) contribution rates. This will lessen
the impact on the OA. |
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| 12. |
Secondly, 76% of
the members experiencing shortfalls borrow
from HDB. All they need is for the loan to
be restructured slightly, such as by extending
the loan period to lower their monthly mortgage
payment. HDB will assist these mortgagors,
and exercise flexibility on a case by case
basis. In cases where homeowners are already
in financial difficulties, HDB allows them
to pay their arrears by instalment, or to
defer payments temporarily. The Minister for
National Development will elaborate on these
later. |
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| 13. |
Thirdly, the CPF
has measures to help from its end. CPF members
can use their SA to top-up the shortfall in
their CPF mortgage payments, to the extent
that these payments are affected by the CPF
changes. It will also extend bridging loans
to those facing shortfalls in mortgage payments
resulting from the CPF changes. I do not expect
many to need bridging loans - the last time
only 125 people signed up to borrow $227,000,
and so far 45 have already paid back fully. |
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| 14. |
I am also glad to
read in the papers today that the commercial
banks are also exercising flexibility to restructure
their mortgage loans to help borrowers cope.
All these measures will ensure that very few
homeowners will experience difficulty servicing
their mortgage payments as a result of the
CPF changes. |
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