Although economists expect mortgage interest rates to rise, homeowners need not panic, media reports said.
They explained that the end of quantitative easing policies in the US may result in rate hikes globally, including in Singapore. However, the US Federal Reserve is expected to raise its short-term, ultra-low rates only after mid-2015 and the increase will not be big.
Tim Condon, chief economist for Asia at ING Bank, said benchmark rates here such as the SIBOR (Singapore Interbank Offered Rate) will likely stay flat until Q4 2015.
“Conditions in the US economy don’t warrant a radical, abrupt tightening of money policy so even if interest rates are raised, it will still remain historically low,” he noted.
The SIBOR or the rate banks lend to each other and usually used to set mortgage levels stands at 0.402 percent for the three-month borrowing period.
At the end of Q3 2013, the SIBOR climbed from 0.374 percent after the Fed warned it would taper its monetary stimulus, said DBS economist Irvin Seah.
Notably, markets usually move ahead of policies. Hence, Fed chief Janet Yellen’s announcement that short-term rates could be raised in 2015 is expected to have a similar effect.
“The days of low interest rates will come to an end eventually, so homeowners, businesses and investors have to factor in the higher cost of funding,” said Seah.
Given that a home loan is a long-term commitment, buyers should first understand the financing considerations prior to committing to anything, said Phang Lah Hwa, head of consumer secured lending at OCBC.
Floating rate loans are suitable for those wanting to take advantage of current low interest rates, while fixed-rate mortgages will suit those looking for stable monthly instalments, she added.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories email romesh@propertyguru.com.sg
Related Stories:
Housing loan growth to slow further
20% of borrowers nearly overstretched: MAS
S’pore home loan growth slows: MAS