SINGAPORE, Nov 25 (Reuters) – Singaporean households, corporates and banks have seen a rise in monetary vulnerability this yr, the city-state’s central financial institution stated on Friday, warning individuals to be prudent about taking up extra mortgage debt.
The upper vulnerability was largely because of the unwinding of pandemic-related precautionary buffers, the Financial Authority of Singapore stated in its annual monetary stability overview.
Nevertheless, the central financial institution’s stress check confirmed corporates and households have been “resilient to macrofinancial shocks”, whereas banks maintain robust capital positions.
The central financial institution famous, nonetheless, that households – particularly these in lower-income teams – ought to be prudent when committing to mortgage loans, given monetary situations have been anticipated to tighten additional in coming quarters.
It stated housing loans remained the important thing driver of an increase in family debt, contributing 2.7 share factors to the general 3.1% year-on-year development within the third quarter of 2022.
The silver lining was that the credit score high quality of housing loans had improved over the previous yr after tighter guidelines have been launched in December final yr.
Mortgage-to-value ratios have fallen to 43% within the third quarter of 2022 from 54% in 2017, and simply 30 items have been foreclosed this yr.
Globally, the Financial Authority of Singapore expects development to gradual sharply over the following yr with inflation prone to stay “considerably” above the goal of many central banks.
Singapore’s central financial institution stated the chance of inflation and rates of interest remaining larger for longer than beforehand anticipated will worsen the debt burden for susceptible households and companies, placing higher stress on banks.
“Nevertheless, banks are higher positioned than within the World Monetary Disaster to handle these credit score dangers and take up losses,” stated the central financial institution.
Reporting by Xinghui Kok
Enhancing by Ed Davies
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