US Rate Rumble – Singapore’s Mortgage Prices Taking the Beat
On June 15, the U.S. Federal Reserve threw the economy a curveball, raising rates by 75 basis points – the biggest jump since 1994. With a possible bump in July, Singapore’s banks are re‑pricing home loans like a chef adjusting seasoning.
Why Singapore’s Rates Follow the U.S. Beat
- Singapore’s open, small economy means global interest shifts reverberate here.
- Central Bank uses exchange rates rather than a hard monetary policy, making domestic rates sensitive to international moves.
- Several “things” have turned up the heat:
- Fed’s fight against inflation.
- Rising oil and gas prices.
- Post‑pandemic supply chain hiccups.
- The Russia‑Ukraine war’s ripple effects.
What Singapore’s Loans Are Saying
With the benchmark rates (SIBOR and SORA) going higher, banks are raising both floating‑rate and fixed‑rate home loan offers. Just two weeks ago, a batch of homeowners received formal letters announcing the new rates. In the past week, the media has been on fire with stories about these hikes. Notably, DBS tossed out its five‑year fixed‑rate loan for HDB flats, which had a sweet spot of 2.05%.
Inside the Quote Garage
Bruce Chow, Head of Loan Concierge at SRX, sums it up: “In a nutshell, these rate increases come from a mix of U.S. policy, global commodity prices, supply chain snags, and geopolitical drama.”
What to Do Next
Homebuyers should:
- Review their loan contract for up‑charges.
- Consider locking in a fixed rate if you’re eyeing a long‑term plan.
- Keep an eye on market rumours – the bank feeds can change faster than a cat on a hot tin roof.
Interest rates can go up to 3 to 4 per cent
Interest Rates Then and Now
Once upon a time, interest rates were the big guys in the room. Think 5‑7% in the 1990s—three times higher than the 3% mark we might see today.
Back then, folks were used to that steep rate when taking out a home loan.
Interest Rates Through the Years: A Roller‑Coaster Tale
Back in the early 2000s, the big‑shot interest rate was hanging around 3.25% to 4%. Pretty much the red‑book “standard” at the time.
Subprime Shake‑up
When the U.S. subprime crisis hit, rates slipped under the one‑percent mark – a dramatic dip that sent a chill through Singapore banks too.
Mid‑2010s Rebound
- 2015–2016: As the U.S. economy began to bounce back, rates started creeping up again.
- Fed hikes triggered a domino effect in Singapore, ballooning rates to a peak of 2.88% in 2019.
Pandemic‑Induced Drop and The New Resume of Inflation
When the global pandemic rolled out, rates fell once more. But as the economy is picking itself up and inflation is humming in the background, the Fed is back on a rate‑raising spree.
Future Forecast
“It’s not out of the question that rates could soar back to the 3–4% band, or maybe even sky‑high,” says Chow. He added that UOB has just upped its three‑year fixed‑rate package to 3.08%.
There’s no ceiling on interest rates for floating rate packages
Will the Fed Snap If the US Hits a Recession?
Rumors swirl that the United States might slip into a recession this coming year, and that’s prompting whispers of a potential interest‑rate “cool‑down” from the Federal Reserve. When banks cut rates, budgets become lighter, and consumers can spend a little more.
Chow’s Take on the Rate Roller‑Coaster
Meanwhile, analyst Chow isn’t exactly pulling out clutch knobs. He says, “You can’t count on the rates dropping big time the moment the US stumbles into a recession because the world’s still pulling the rug up.” In other words, global jitters keep the scene wildly unpredictable.
- Timing’s a Guesswork: Recession chatter isn’t a free‑mail ticket to lower rates.
- World‑Wide Wild Card: Geopolitical twists can turn any “easy‑money” plan into a tightrope walk.
- Volatility Vibes: Markets are buzzing, and not necessarily in a Starbucks‑nice‑morning way.
Bottom Line
So, while the Fed might lean toward slashing rates, the lattice of global events keeps them on their toes. And if you’re hoping for a rate giant leap downward, you might want to keep your eyes peeled and your wallet a bit extra stuffed.
Interest Rates Hitting the Sky (and Living in Our Wallets)
When it comes to borrowing money, the government’s been clear: there’s no cap on how high interest rates can climb. According to Chow, the money could balloon up to 5%–7%—or even more—if the market plays its trickiest cards.
Keeping Our Home Loans from Turning into Stratosphere
But don’t panic just yet. Chow believes the government will keep a close eye on these rates and is ready to swoop in with action plans if things start to soar.
Dec 2021: The Cooling Wall of Measures
- Lowered TDSR (Total Debt Servicing Ratio) from 60% to 55%.
- Reduced LTV (Loan‑to‑Value) ratio for HDB loans from 90% to 85%.
Choosing the Safe Bet: Fixed‑Rate Loan Packages
For the foreseeable future, Chow recommends sticking with a fixed‑rate loan if you want a definite, hassle‑free experience. Think of it like locking in the price of your coffee for the next two years—keeps the surprises at bay!
Fixed-rate home loan options are available
When You’re Stuck With Banks for Your Home Loan Choices
Private Properties – The Bank‑only Game
Got a sneaking suspicion that the only way to finance a private house is via banks? You’re not alone. Banks are the exclusive suppliers, offering two main flavors:
- Home loans tied to the bank’s own rate. They’re basically standard bargains that fluctuate with the market.
- Home loans linked to DBS’s Fixed Deposit rate. Think of this as a “save‑on‑save” approach – if you’re a patient investor, it might be a decent pick.
HDB Flats – A Tiny Pocket of Options
Those locked into the HDB world get a sweet little extra: the HDB concessionary loan. Over the last 20 years, this rate has kept its cool at 2.6% (just 0.1% above the CPF Ordinary Account’s 2.5%). It’s been a solid, predictable playground compared to the wild roller‑coaster of private loan rates.
Why’s it Pop‑Up as More People Want It?
In recent years, the concessionary rate has outshone most banks. That’s why so many people found themselves refinancing from a bank loan into an HDB loan. But life (and finance) loves a twist: bank rates are now climbing—fixed‑rate packages are at least 2.65%. That puts a spotlight back on HDB concessions, a bright spot for fresh buyers looking for the next best deal.
Here’s the catch: if you’ve already signed up with a bank loan, you can’t revert to an HDB concessionary loan. It’s a one‑way ticket that can feel a bit like a “no‑exit” policy if you’re not careful.
Bottom Line
Whether you’re eyeing a private property or an HDB flat, the loan landscape is as dramatic as a soap opera. Stay alert, shop around, and remember: the concessions, if you haven’t already locked in a bank deal, could still be your best bet.
Will we also see an increase in interest rates for the HDB concessionary loan?
Concessionary Rate Review – It’s Time for a Quick Check‑Out
Every year, around the four quarters—January, April, July, and October—we buzz up the clock to revisit the concessionary rates, just like the CPF rates do. So, yeah, the next review is practically hissy‑fit in the near future.
Will the Rate Spark In A Fire?
Most folks are hoping for a “boom” in the rates, but the truth? The chances are pretty slim.
What the Expert Says
- Chow’s Take: “All the interest rates—including those for fixed deposits—have to rise pretty high before the government thinks it’s fair to bump the CPF Ordinary Account contribution rate.”
- He adds a jokey pause: “That’s super rare. Happened zero times in the last 20 years.”
Bottom line: It’s all about keeping the numbers in check and staying on the safe side of the budget. The government’s only ready to adjust when the market gives them a clear signal—otherwise, they’ll keep the status quo.
Article Roots
This piece first graced the digital world courtesy of 99.co. It’s about staying updated on financial matters for home‑buyers and loan seekers alike.
