Mortgage Interest Rates In 2024

Mortgage Interest Rates In 2024 – SINGAPORE – Average mortgage rates in Singapore have doubled in the past six months as global central banks fight inflation by raising interest rates, hurting local homebuyers.

Real estate analysts believe another rise in mortgage rates is imminent, especially after the Federal Reserve announced its biggest rate hike since 2000 on Wednesday (May 4).

Mortgage Interest Rates In 2024

The relatively sudden increase in debt costs has prompted analysts and banks to encourage homebuyers to save enough money as a “cushion” and seek new loan options or deals as needed.

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For two-year mortgages, the average interest rate from banks in Singapore rose to 2.25% in May and 1.15% in December, according to mortgage broker Redbrick Mortgage Consulting, which compares rates across banks.

Rates for a three-year mortgage were 1.15% in December, and rates doubled to 2.5% in May.

Redbrick said floating-rate mortgages, which are linked to benchmarks such as the three-month Singapore Bank Offered Rate (Sibor) and the Singapore Overnight Average (Sora), also rose.

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Compared to the previous quarter, the three-month Sibor increased from 0.43% to 1.05%, and the three-month Sora increased from 0.15% to 0.30%.

Sebor and Sora are benchmark rates that banks use to set mortgage rates for home buyers, for example.

Mortgage rates have risen more sharply in the past two months than in the previous four months. The two-year mortgage rate increased by 0.25 percentage points to 1.4% in March from 1.15% in December 2021. It rose to 0.85% in May and is now 2.25%.

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Nicholas Mack, head of research and advisory at property agency ERA Realty, said mortgage rates have been rising since Singapore interest rates moved in tandem with global rates six months ago.

This is because Singapore’s central bank, the Monetary Authority of Singapore, controls inflation, rather than setting interest rates directly to the country’s major trading partners.

Mr Mak said interest rates in Singapore and globally were relatively low at the end of last year because they had remained that way during the pandemic.

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Two years ago, when the COVID-19 pandemic hit, the economy would slow, so central banks kept interest rates low to keep the global economy afloat. But when inflation starts to rise, interest rates will (expectedly) rise. Mr. Nikolay Mak, Head of Research and Consulting, ERA Realty”

“When COVID-19 hit two years ago, people expected the economy to slow down, so central banks kept interest rates low to keep the global economy afloat,” Mr Mack said. “But since inflation started to go up, people have interest rates. They had to go up.”

But earlier this year, as economies around the world opened up and people started spending more, central banks raised interest rates, reducing demand and easing price pressures.

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As Singapore’s economy (including its currency markets) is closely linked to global trends, this means that Singaporean banks have raised interest rates, including mortgage rates.

Mortgage rates have risen sharply in the past two months, partly due to worsening global inflation, partly due to Russia’s invasion of Ukraine and central banks raising interest rates.

Wednesday marks a half-percent rate hike by the Federal Reserve as the US is the world’s largest economy and the dollar is the global “reserve currency.”

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“Some banks are raising interest rates after the Fed’s announcement,” said Mr Stephen Tan, chief executive of property company OrangeTee & Tie. “As long as inflation continues, interest rates will continue to rise.”

For example, Mr. Chen predicts that two-year mortgage rates will rise to a maximum of 2.75% from the current 2.25%.

Joan Tan, associate director of Redbrick Mortgage Advisory, expects the three-month Sora rate to rise from 0.3% to 1% and the three-month Sibor rate to rise from 1.05% to 1.6% in the coming months.

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Banks and property analysts say today’s homeowners need to save enough money to cover changes in mortgage rates.

One main reason is that some banks have changed their package terms. For example, Mr. Chen recently said that foreign banks would stop offering fixed interest rates.

“It is better to go back to their bankers to assess the current status of their packages,” he said.

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Nelson Neo, head of home finance solutions at DBS Consumer Banking Group, said borrowers should set aside enough money as a “buffer in case of further interest rate rises or unexpected circumstances”.

OCBC Bank’s head of home loans, Ms Marianne Phua, said borrowers should check their mortgage plans regularly.

“It is beneficial for consumers with existing mortgages to periodically review their existing mortgages and take a holistic view of pricing, servicing and loan terms,” ​​he said.

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After reviewing their current loans, homeowners may consider refinancing their mortgage, which means paying off the existing loan and replacing it with a new one.

In response, a Maybank Singapore spokesperson said customers can also contact the bank if they want to renew their loans after the closing date.

DBS’s Mr Neo said “homeowners looking to refinance their home loans are encouraged to contact their existing bank to check their existing loan terms and whether there will be any charges such as early repayment”.

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Christine Sun, senior vice president of research and analysis at real estate agency OrangeTee & Tie, said there can be penalties for refinancing if the rate difference is large enough that it can be worth it in the long run.

“They have to calculate whether they have to pay a penalty or whether they have to increase their monthly mortgage payments,” he said.

Mr. Mack of ERA Realty added that it would be beneficial to pay off part of the loan now that the homeowner has enough cash.

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“That way, they won’t have big loans,” Mr. Mack said. “Because interest is charged on non-repayable loans.”

For example, a savings account in which a borrower holds their money may pay 0.5 percent per month, while a mortgage may add a higher rate of interest.

“If you’re paying a higher mortgage (interest rate) and your savings account has a lower interest rate, you might want to consider paying off part of the loan.”

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PropertyGuru Group fintech vice-president Paul Wee said borrowers could also consider restructuring such as extending the loan tenor or using Central Provident Fund (CPF) funds to service the home loan.

“They can also consider future plans, such as retirement planning, family planning and incorporate these requirements into (mortgage) plans,” he added.

For potential home buyers, the choice between a fixed rate or variable rate mortgage depends on their risk appetite, as both options have their pros and cons.

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According to Mr. Mack, traditional fixed-rate mortgage rates are often fixed at a higher rate than variable-rate mortgages, which are more stable for borrowers.

“It really depends on the borrower’s risk appetite, whether the borrower should take a bet and stick with floating rates and trust that rates won’t go up that much… There’s no right answer.”

Redbrick’s Ms Tan said borrowers should think about the long term rather than the immediate interest rates. Because the floating rate may exceed the two-year rate during those two years.

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“Right now, people can choose between a variable rate of 0.95 percent or a fixed rate of 2.25 percent,” he said.

OrangeTee & Tie’s Mr Tan said the bank also offers customers fixed and floating rate options to “even out the risk”.

For example, DBS Bank has a scheme where the borrower can put a part of the loan amount into a fixed rate scheme and the rest into a floating rate.

Mortgage Rates Increasing

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