LENDERS must make sure that home loan borrowers can afford their instalments when they fall due, says the Monetary Authority of Singapore.

Financing schemes that allow home buyers to make a 20 per cent downpayment - and then pay nothing until the granting of a temporary occupation permit, which may be up to three years down the road - have become popular to help developers move projects.

Some observers say that given the worsening economic outlook and falling property prices, such payment schemes - offered by banks after the government banned deferred payment schemes last October to rein in speculation - will pose higher risks to banks.

Deferred payment schemes were offered by developers.

'MAS expects all financial institutions granting any kind of housing loan to apply prudent credit assessment criteria,' an MAS spokeswoman said in response to a BT query.

'Lenders must satisfy themselves that borrowers have the necessary means to make principal and interest payments as and when these become due.'

BT reported on Tuesday that Maybank, OCBC Bank and United Overseas Bank are offering the schemes. Standard Chartered Bank will launch one soon. DBS Bank, on the other hand, has decided to stop offering such schemes.

Recently, some economists have slashed their economic growth forecasts. Some are tipping growth as low as 3.3 per cent this year, whereas a few months ago, figures of 5 per cent or more were confidently put forward.

Also last month, Citi analyst Wendy Koh said that she expects a 20-30 per cent price correction for high-end properties from their recent peak, and reckons the mid-tier is likely to decline 10-20 per cent.

This article was first published in The Business Times on September 4, 2008.