The Singapore Commentator

In the wake of recent crackdowns by the Monetary Authority of Singapore (MAS) on rebates and freebies being offered by banks to get around rules on housing loans, Ignatius Low complains in The Straits Times today that the MAS is a “party-pooper”.

[S]uch interventions by the MAS can deprive consumers of lower prices and greater choice — which are direct benefits brought about by competition between banks. Consumers are now paying less than ever before for their mortgages, as banks move to compete on not just interest rates, but also a whole variety of freebies and other perks. And they also have a wider range of options... So why stifle free competition that has been proven to benefit consumers?

He then goes on to answer his own question.

Sure, the banks pushed the envelope a bit. Sure, there are rules which must be observed. Sure, the MAS must have felt compelled to act to avert what it feared might be the beginnings of unbridled excesses in the property market.

Although housing prices in Singapore have come down considerably in the past few years, I am ambivalent about any measure taken to loosen credit control on housing purchases. The Business Times reported last month that more than 18,000 private residential homes remained vacant as at the end of September 2004. Borrowers who are taking advantage of the present low interest rates and other goodies offered by the banks may find — in a few years’ time — that they did not get a good deal after all.

If we accept that credit control serves a useful role in stabilising the economy and preventing both borrowers and lenders from overextending themselves, then I think we should allow it to work properly. Allowing banks to circumvent credit control regulation may do more harm than good.