Homeowners worry about rising interest rates

Singapore. Many homeowners have stated their concern the moment banks announced that they will hike up interest rates for home loans.

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In an interview from Today, Mdm Siti (not her real name), a 32-year-old woman, took out a loan with the Housing and Development Board (HDB) for her four-room resale flat. She then refinanced with a bank loan of S$260,000, with a 25-year tenure and a floating rate of 1.3%, with a three-month compounded SORA or the interest rate benchmark used by banks to determine floating rate loans.

According to her, the rate increase significantly impacts her family’s monthly expenses.

“I think we’ll be able to ride the wave for some time still, but we’ll keep monitoring the interest rates. Even if we were to refinance, we have to consider if the refinancing fees of about S$1,500 to S$2,000 are worth the monthly savings,” she said.

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Despite this, analysts say that foreclosure concerns are not evident in the future thanks to the strong job market. The unemployment rate in Singapore is also low,

which means that homeowners are still able to find jobs and earn enough money to pay for loans.

Moreover, Singapore borrowing rules are strict to ensure individuals won’t overextend themselves easily.

But how do the rising interest rates impact Singaporeans in the long run?

According to Chris Koh, director of real estate agency Chris International, the impact will not be significant.

“The housing market in Singapore saw a 6% to 7% interest rate in the 1990s, so a high interest rate has happened before due to the Asian financial crisis,” he said.

“If interest rates go very much higher, say to the point that an instalment goes up by about S$1,000, I think people might want to consider disposing of their property and downgrading to a smaller home,” Koh added.

Economist Song Seng Wun from CIMB Private Banking also stated that the ability of people to repay loans will mostly depend on themselves.

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