SINGAPORE Feb 25 (Reuters) - Singapore’s central bank will impose limits on bank loans for motor vehicle purchases, as it tries to stop consumers from taking on too much credit while borrowing costs are low.
The Monetary Authority of Singapore (MAS) said on Monday that loans for a vehicle with an open-market value of up to S$20,000 ($16,200) will be capped at 60 percent of the purchase price, while those worth more than S$20,000 will be limited to 50 percent.
“In this prolonged environment of very low interest rates, there is greater risk of buyers over-extending themselves on motor vehicles,” MAS said in a statement.
The length of a loan will also be capped at five years, with the new rules taking effect from Feb 26.
The cost of buying a motor vehicle in the city-state is high compared to other developed economies, with owners having to first bid for a 10-year Certificate of Entitlement (COE), which currently costs around S$90,000 for a car, and then pay for the vehicle itself. ($1 = 1.2376 Singapore dollars) (Reporting by Rachel Armstrong; Editing by Kim Coghill)