Finding the Best Home Loan Deal During Singapore’s Rising Interest Rates

By Dawn Chew Finding the Best Home Loan Deal During Singapore’s Rising Interest Rates |Published 21 Feb 2022 3 minutes

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At a glance...

Singapore introduced new measures at the end of 2021 to cool the rising pieces of residential property prices. After a 10.6% increase in private home prices during 2021 and between a 1-4% expected increase for 2022, the market is starting to get a little concerned.

Whether the demand is because homeowners are tired of being stuck in the same location from working at home for so long, or because remote work has allowed so many people to explore new places to live, the demand is way up, and the banks are happily helping out.

With so much demand from local and foreign investors and a shrinking supply of quality single-family homes, it is no surprise that the Monetary Authority of Singapore is getting a little nervous. However, first-time homebuyers and those looking to refinance their terms should be the real concern. If the market continues to rise, getting in now and locking in a rate is the best option.

Why is this happening?

The unfortunate reality is that Singapore tends to mirror the rest of the world because our economy is based on many exports of essential products purchased from foreign governments. That means when Covid 19 was in full swing and governments from the US to England stopped purchasing so many electronics, machinery, and other items, the flow of investments came to a practical standstill. So Singapore lowered rates just like everyone else to help spur growth.

Now that many of these international economies are rebounding, their monitory oversight organizations are raising interest rates to ensure inflation does not take over. That does not end well for many middle-class families looking for home buying relief. As these interest rates rise, the purchasing power of many citizens goes down.

Combine the international economy with the local repercussions of so many housing projects being shut down due to the pandemic, and you are left with a buying frenzy. There are many buyers now waiting five or more years for the homes that they were promised. Instead of waiting for construction to resume, these buyers are looking to break deals and move to something already on the market.

What does this mean for home loans?

Even a 1% change in a variable or floating rate home loan can result in significant increases in monthly payments, not to mention the lifetime of the original loan. For those that were lucky enough to secure fixed rates while interest rates were low, good work and do not change a thing!

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Considerations

For everyone else, you need to start monitoring the current rates right now, or else risk paying a lot more money for the same amount of property. The overall supply of new homes is projected to drop 17-20% from 2019 to 2020 numbers. That means new home sales may slip as buyers turn to secondary markets, further driving prices up. Banks will likely seize on these opportunities and, along with the rising interest rates, cause significant debt increases for many people without fixed rates.

The full impact of these hikes will probably not come to fruition until 2023. That means there is a short window right now. There are already some Singapore banks raising the rates on their existing fixed-rate packages, but that does not mean you cannot find a better deal.

How do I lock in the best rate now?

Whether you are looking to refinance your property or considering purchasing a new home, ROSHI’s new home loan marketplace can provide you with hyper personalised mortgage solutions. In as little as 2 minutes, you could be seeing terms that work for your very personal circumstances and financial situation.

Once you have had the opportunity to explore the different options available to your application, you can chat directly with various loan managers to secure a new home loan. Everything is done on the platform, including uploading supporting documents so you can fast-track your application process and seize the best available rates.

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Insider tip

If you want to take advantage of the best rates, try to present a loan application that meets the trinity of a great profile – steady income, great credit score, and a above minimum deposit amount. Demonstrate your income over the past year or two that shows you are a reliable lender, present a healthy credit score that shows you understand responsibility, and shoot for 20-25% down in available liquid assets for your final purchase.

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