The Nanny in the Property Market?
UOB CEO Wee Ee Cheong did not like today’s headlines – 50-year home-loan a ‘gimmick’: Khaw. The MND minister’s own words, “There is now some gimmick, a bank offering 50-year loans. Please don’t fall for that. It doesn’t make sense.”
He is talking as a minister whose portfolio includes housing and stopped short of saying that the loan is downright dangerous, which is up to MAS or the finance minister Tharman to put up the Stop and Danger signs along the way. With new and resale HDB flats plus mass market condos deemed as expensive, the UOB loan is actually a good option for those who can weigh the risks vs lower loan repayment per month over the years since home loans are extended to 50 years.
The caveat is therefore if the home buyer can weigh the risks. In theory, the home buyer is in a good position if the flat is sold after MOP. Reach for something beyond one’s means, pay low interest rates because it is a 50-year loan and because interest rates are low for now. However, these quick-get-rich plans can turn upside down very fast if the home owner does not have deep pockets and can hold on when the market sputters. After all, interest rates won’t be low forever.
This is beyond whether a 50-year loan is good or bad. Some might benefit from it now and regret later. Others might benefit from it now and rejoice later. Should Khaw intervene and tells us what is good or bad for us? Like how the government wants to be a nanny in other ways e.g. introduced CPF minimum sum, medishield changes, eldershield criteria to protect Singaporeans from themselves? Maybe it is not whether the government must or must not intervene and be a nanny, but how much they should intervene. If that is the case, what are the strict conditions for a 50-year loan to protect Singaporeans from themselves? Lower the debt to income ratio?