http://www.straitstimes.com/archive/...ncome-20140117

Household debt '2.1 times income'

Published on Jan 17, 2014

By Chia Yan Min


ONE in five borrowers have repayments of between 40 per cent and 60 per cent of their monthly income, according to the Monetary Authority of Singapore (MAS).

The figures were revealed yesterday by Parliament's Estimates Committee which had enquired about household debt.

The MAS had responded that the household debt-to-income ratio fell in the second half of the last decade but has been rising slightly since 2009 due to the booming property market.

Yet household debt stood at 2.1 times household income in 2012, lower than the peak of 2.6 times in the mid-2000s.

The MAS warned last year that 5 per cent to 10 per cent of Singaporean mortgage holders were overstretched with repayments exceeding 60 per cent of their monthly incomes.

However, most of these borrowers were reported to be earning more than the national monthly median salary of $6,000.

UOB economist Francis Tan said yesterday that there is no "rule of thumb" for a country's household debt servicing ratios.

Borrowers here have a relatively high savings rate and low rate of unemployment, he added.

"As long as there is no sudden spike in interest rates - and the hike is expected to be very gentle - most people should be able to continue servicing their loans."

The Estimates Committee's report also showed that the take-up rate of the Productivity and Innovation Credit (PIC) was highest among large firms, with turnover of $100 million and above.

The scheme recorded claims from 81 per cent of firms in that category in 2012 compared with 74 per cent of firms with turnover between $10 million and $100 million.

About 59 per cent of firms with revenue of between $1 million and $10 million made use of the scheme, while only 24 per cent of micro-enterprises - with turnover of below $1 million - tapped on it in 2012.

The PIC scheme offers firms a tax deduction or cash payout when they invest in things such as automation, staff training or research and development, to improve productivity.

The report also said that the Consumer Price Index (CPI) figures for different income groups published by the Department of Statistics can be "difficult for the lay public to understand".

It recommended that the Ministry of Trade and Industry include an illustration of what the figures mean in dollar terms, with regard to actual expenses and income.

"Such an illustration would help the public to better understand their expenditure patterns and the impact of the CPI changes on household expenses," the report said.

The eight-member Estimates Committee examines the Government's Budget and suggests improvements.

It is chaired by Marine Parade GRC MP Seah Kian Peng and includes six other People's Action Party MPs and Workers' Party MP Png Eng Huat.

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