A third of home loan borrowers face repayment challenges: poll

OCBC's Financial Wellness Index dips from the setback to Singaporeans' financial health brought by the pandemic

Tue, Nov 24, 2020


COVID-19 was a setback for Singaporeans' financial health, impacting their ability to pay their housing loans and dragging down their passive income, a survey by OCBC has found.

The OCBC Financial Wellness Index, which launched in 2019, has dipped to 61 this year, down from 63, on the back of the pandemic fallout and the resulting global economic slowdown.

A total of 2,000 working adults in Singapore between the ages of 21 and 65 were surveyed online between Sept 2 and Oct 3. About a third of these respondents (31 per cent) had issues paying off their housing loans; 9 per cent indicated that they may be forced to sell off their property or downgrade, the survey found.

However, the survey did not ask whether respondents had deferred their home loan repayments, as part of moratoriums offered by banks as part of Covid-19 relief.

Koh Ching Ching, OCBC's head of group brand and communications said: "While we did not ask respondents whether they had applied for home loan moratoriums, it is not a surprise to us that this indicator has taken a dip this year compared to 2019, given the unprecedented financial impact of Covid-19."

Singaporeans' passive income was also hit by the weakening economy, mostly due to the poor performance of dividends, which is their main source of passive income. The index score on this front fell from 42 last year to 28.

After dividends, the other top sources of passive income are interest income and rental income. Despite the pressure on financial health, Singaporeans are still saving more to cope with potential contingencies, with about 28 per cent of income saved each month.

Millennials stood out among the age groups for having the most financial worries - 49 per cent of them are concerned about money, compared with 37 per cent for Gen X and 26 per cent for baby boomers.

Millennials are, however, driven to start investing earlier than their predecessors due to a desire to grow wealth fast, said OCBC. While millennials are the most likely to do their own research before making financial decisions, only about a quarter of them seek professional advice. Some 39 per cent of millennial investors say they speculate excessively to make quick gains.

Another finding from the OCBC survey was the discrepancy in financial goals between Singaporean women and mothers. Singapore women said they make growing their own wealth the top financial priority (51 per cent), followed by a tie between retirement planning and taking care of loved ones financially at 47 per cent.

Among mothers, the top priority is taking care of loved ones financially at 56 per cent, followed by planning for their retirement at 46 per cent; growing their wealth came in last at 40 per cent.

While the survey found that more women than men believed that they did not know how to grow their money, those who said that they were confident and knowledgeable in making investments earned a higher rate of return than men.

Overall, OCBC found Singaporeans unprepared for retirement: three-quarters are not on track with their retirement planning. The majority of respondents underestimated the amount needed for their ideal retirement lifestyle by an average of 32 per cent.

OCBC's head of wealth management Singapore Tan Siew Lee said: "From the OCBC Financial Wellness Index 2019 and 2020, the message was clear: Singaporeans don't have a good understanding of their overall financial situation and of their projected financial needs when they retire."

The bank has thus enhanced its OCBC Life Goals financial planning portal to help Singaporeans plan for longer-term goals like retirement.

Ms Tan will conduct a masterclass for women to build their confidence in investing.

Ms Koh noted: "We had hoped that the Index would improve from 2019 or remain the same, but the financial impact of Covid-19 on Singaporeans was undoubtedly reflected in the drop in the Index."

But she noted that Singaporeans are becoming more prudent and saving regularly, while setting aside emergency funds.

If these habits stick and lessons are learned from the crisis as Singapore and the region recover from the pandemic, we expect to see a rise in the Index next year - perhaps even surpassing 2019's result," she said.