Fixed-rate mortgages in Singapore seen hurtling towards 3%
Fixed-rate mortgages in Singapore seen hurtling towards 3%. MORTGAGE rates in Singapore have risen further as lenders follow the lead of the US Federal Reserve, with some market participants predicting fixed rates close to 3% as inflation forces central banks to maintain high benchmark interest rates.
Fixed-rate home loans have been increasing since the beginning of 2022. The fixed rates for two-year home loan packages at OCBC and UOB are 2.65 percent per annum.
DBS stated that it is almost finished with its new fixed rates for private property owners. According to its website, the current 5-year fixed rate of 2.05 percent per annum is “exclusively for HDB homeowners.” The DBS rate was 1.65% for a 2-year fixed loan and 1.85% for a 3-year loan about 3 months ago.
“Many homeowners have never seen mortgage rates this high in the last 15 years since the 2008 global financial crisis,” said Darren Goh, executive director of MortgageWise.sg.
Mortgage Master CEO David Baey expects banks to raise fixed rates to at least 3% by the end of the year. Homeowners are rushing to refinance, he said, noting that the company received 50% more refinancing inquiries in the second quarter compared to the first.
According to Clive Chng, associate director at Redbrick Mortgage Advisory, 2-year fixed rates will rise above 2.7 percent in the coming months, with 3-year fixed rates hovering between 2.8 percent and 2.9 percent.
“If inflation numbers continue to be high and force the Fed to be aggressive in their rate hikes, then we will most likely see this in the next couple of months — assuming banks continue to offer fixed-rate packages,” Chng said.
According to the Business Times, some foreign banks in the country suspended fixed-rate options in April due to rising funding costs.
However, BT was informed by three local banks that their fixed-rate packages are still available.
With US inflation at a 40-year high, the Fed approved a 0.75-percentage-point increase in the federal funds rate — to a range of 1.50-1.75 percent — on June 15, making it the Fed’s most aggressive interest rate hike since 1994.
The federal funds rate is the Fed’s target interest rate at which commercial banks borrow and lend their excess reserves overnight.
Singapore’s domestic interest rates are heavily influenced by global market movements, particularly those in the United States, the world’s largest economy.
According to MortgageWise.sg’s Goh, inflation is likely to remain “sticky for a while” and that there was a “false peak” in May.
Goh believes the federal funds rate will rise above 3% by the end of the year. If this happens, the 3-month compounded Singapore Overnight Rate Average, or Sora, could reach 2% around 3 months into 2023, assuming some “laggard effect.”
Because it is averaged backwards by 90 days, Goh previously told BT that the metric will likely be slower to respond to rate hikes.
However, according to Wayne Quek, director of Home Loan Whiz, the impact will be felt sooner. He anticipates 3-month Sora to be between 2.2 and 2.3 percent by the end of the year.
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