Saturday, July 21, 2012

50-year Home Loans

Read this first thing yesterday morning.

This is an unhappy development. I sincerely wish MAS would frown on this. As a rule of thumb, it punishes thrift and reward loading up on debt. It makes our economy more prone to shocks beside elevating the price level of homes.

Debts is a great invention but must be respected, even feared. It is a good servant but the harshest taskmaster if you fall under its spell.

Update: 3:45pm We all know this for a long time but perhaps some of us do not work this out far enough. The big assumption of a housing loan is that it assumes your pay will rise over time. Therefore the immediate affordability trumps the tenure of the loan. This assumes the the economy would always grow (this is the bit many miss) and that if necessary (it turned out to be necessary!) debt must be used to fuel that growth. In this system, it is either you grow or die. Democracy cannot be supported without economic growth because government cannot find the money to remain successful and popular. That is why our government will never ever entertain any suggestion of less than peak growth.

Unfortunately this growth strategy cannot go on indefinitely but no one wants to worry about this. The solution is to keep looking for new sources of growth. The better way is to grow through innovation and entrepreneurship, which we can and must do a lot better. We drove growth by the worst possible way: adding inputs with low and may be negative productivity. We end up with all the social and infrastructure problems we are living down today.

Update: July 23

I am elated by some of the responses to CNA prompt today.

Fancy a home loan that spans half a century? Some banks in S'pore are increasing the terms of their mortgage loans amidst a red hot property market. UOB is offering a new 50-year loan, while OCBC is offering special 40 year loans. How far would you stretch YOUR loan?

  • Ernest Lim ‎50 years for a loan .... progress for our nation. National pledge harder to recite every year.
    44 minutes ago · Edited ·  · 3

  • Terence Tan There is a simple solution to all this. if you cant afford then don't not buy such a big house or get a loan that span 50 years. No one force you to do all this.
    43 minutes ago ·  · 5


  1. i very much doubt that any of us can remain gainfully employed for 50 years. (there is one exception. the indiv is still employed at 87. and at a salary that will take many sporeans at least 5 months to earn. not sure if the person is performing the duties he's paid for.)

    once you hit the big 40 today, and you lose your job for whatever reason, you're gone case.

  2. 50-year home loan? That's insane! I can only imagine the total interest paid on this one.

  3. Information on stretching the tenure of the home loan to one's convenience and ability to pay back the installments without delay.

  4. Are you defaulting on your mortgage payments? No need to lose heart, there may be a program for mortgage help that can enable you to keep your home. Given the state of today's economy, affected by a slowdown, an increasing number of homeowners are struggling to keep up with their monthly mortgage liabilities and facing the crisis of foreclosure.

    mortgage marketing