However, there are many holes in the article. First, what the article did not mention is with the danger of taking a bank loan. TRS spoke to economic blogger and analyst Leong Sze Hian who said that if a person is unable to pay for their bank loans, “the bank will foreclose” the flat. In other words, the flat will be taken over by the bank. If a person were to take up the HDB Concessionary Loan, the owner would be allowed the option of paying a lower interest or not pay for up to a year, which gives the owner a bit of a breather. But here is the snag. If a person takes up the HDB Concessionary Loan, he or she would have to pay higher interest rates. Not only that, if the owner decides to sell the flat at some point, he or she would have to pay back another 2.5 percent interest back to the CPF. According to the CPF, this is known as the “accrued interest”. The CPF Board says that because the board was not able to pay the 2.5 percent interest on the money that had been taken out of the CPF for the loan, it would require homeowners to pay back this interest when they sell their flats. This means that the HDB scheme effectively entraps low- and lower-middle income families. First, they are forced to take up the HDB Concessionary Loan to prevent immediate foreclosure of their flats, but this comes with higher interest and higher payments. Second, if they are required to sell their flats in future, they would also need to double-pay on the interest, by paying another 2.5 percent interest on top of the 2.6 loan interest that they had pay. This would mean that the majority of poorer Singaporeans have to opt to stay on a higher-paying scheme and lose more of their money to the HDB and CPF Board. Higher-income home owners would be able to switch to bank loans, pay lesser and have more savings. The system is regressive.
Posted on: Mon, 24 Nov 2014 03:29:28 +0000