The cooling measures will temper borrowing activities.
The mortgage arms of Singapore banks could expect moderate expansion of 3% in both 2019 and 2020, according to Fitch Ratings, as lending softens due to slowing home prices, rising interest rates and property cooling measures.
"The agency expects owner-occupied home purchases to remain the main driver of mortgage loan growth," the ratings agency said in a report.
The subdued growth in home loans comes after the government imposed surprise cooling measures in July 2018 which saw the Additional Buyers' Stamp Duty raised by an additional 5-10pp and Loan-to-Value (LTV) limits tightened by 5bp.
The cooling measures did not have immediate negative impact on Singapore home loans on the back of previous approvals that banks drew down, according to a flash note by DBS, which suggested that the curbs will likely hit banks hard by 2019.
As mortgage rates rise, the non-performing loan (NPL) ratio of the housing segment is expected to rise from 0.4% in 2018 to 0.7% in 2020.
"The housing NPL ratio was 0.4% in 2Q18 and we expect it to rise only slightly to 0.55% in 2019 and 0.65% in 2020," the research firm added. "However, we expect any increase in delinquencies to be limited due to support from rising household incomes, a tight labour market and strong household balance sheets."
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