MAS' move is part of the government's broader aim of avoiding a price bubble and fostering long-term stability in the property market.
The maximum tenure of all new residential property loans will be capped at 35 years.
In addition, loans exceeding 30 years' tenure will face significantly tighter loan-to-value (LTV) limits. (* We understand from tonight's news report that the new ratio will be 60% for first property and 40% for all subsequent proporties *)
The new rules will apply to both private properties and HDB flats.
"Over the last three years, the average tenure for new residential property loans has increased from 25 to 29 years. More than 45% of new residential property loans granted by financial institutions have tenures exceeding 30 years," MAS said.
"The new rules aim to curb continued upward pressure on residential property prices, driven by low interest rates and rapid credit growth," the central bank added.
Previous rounds of measures have had a moderating effect on residential property prices. There is also significant supply of housing that will come onto the market over the next two years.
However, prices in both the HDB resale market and private residential property have continued to rise in Q2 and Q3 of 2012.
Private home prices rose 0.5% in the third quarter from the April-June quarter, when prices increased by 0.4%, while HDB resale prices gained 2.0% quarter-on-quarter following an increase of 1.3% in April-June.
Source: Channel News Asia