Question:

To ask the Prime Minister (a) whether the increase in personal debt amongst young adults below 30 years old in the past year is sustainable; (b) what preventive measures can be put in place to avoid youth indebtedness from taking root in Singapore.

Answer by Mr Tharman Shanmugaratnam, Senior Minister and Minister in charge of MAS:

1 MAS has put in place a number of prudential limits on borrowing by individuals and households, so that they do not borrow beyond their means. They are generally more extensive and stringent than in many countries.

2 Unsecured borrowing by an individual is subject to the individual meeting minimum income requirements, and the total amount of such borrowing is capped at his or her annual income. Mortgages, which constitute the largest liability for households, are subject to both a loan-to-value limit and a total debt servicing limit.

3 For now, there are no worrying signs of rising indebtedness amongst young adults. Average monthly default rates amongst borrowers below 30 years of age have remained low at less than 0.7% from March 2020 to March 2021.

4 The number of young adults with credit card rollover balances dropped by 23% from March 2020 to March 2021. Their average rollover balances also fell by 15% year-on-year.

5 The number of young adults with unsecured personal loans has fallen by 33% over the same period, and the average level of such loan balances fell by 21%.

6 As for secured loans, the average outstanding balances of mortgages by young adult borrowers fell by 12% between March 2020 to March 2021. Whilst the average balances for secured personal loans, excluding mortgage loans, increased by 4% in the same period, these were typically offered by private banks to high-net-worth individuals. Young adults with secured personal loans make up less than 1% of the young adult population.

7 Besides regulatory limits on borrowing, financial education helps to inculcate good financial habits among our young adults. Key financial concepts have been added to the curriculum, from primary school up to tertiary levels; concepts such as the effects of compound interest and the responsible use of credit. The efforts are complemented by outreach activities organised in school campuses by MoneySense, our national financial education programme.

Source: Monetary Authority of Singapore