Ms Nicole Ho, 32, who works as a freelance web designer, is stressed. Her monthly home loan payments have been increasing, even as she grapples with inflation and higher prices.
Ms Ho, who asked that her real name not be used, moved into her five-room Housing Board resale flat in Boon Keng with her husband in 2017. Then, the newlyweds were paying about $1,900 a month to service their mortgage using their CPF savings and cash.
Today, that figure has soared to over $2,900.
“We refinanced our home loan (with our bank) in October this year, and the interest rate increased from 2.9 per cent to 4.4 per cent,” Ms Ho explains. “Before this, the amount that we were paying was in the low $2,000s.”
Mortgage rates in Singapore have been rising in line with global interest rates, with fixed home loan rates offered by local banks reaching up to 4.5 per cent.
Increased financial stress
Ms Ho and her husband are not the only ones facing financial woes. Singaporeans surveyed in the latest OCBC Financial Wellness Index scored an average of 61 out of 100 in terms of financial wellness – down from last year’s 62.
The average Index score was also 61 in 2020, when Singaporeans were grappling with the start of the pandemic.
The Index surveyed over 2,000 working adults in Singapore between the ages of 21 and 65 in August 2022.
Singaporeans are seeing poorer investment returns and increased debt stress this year. The Index reveals that 40 per cent of Singaporeans said they face difficulties in paying off their mortgage loans, compared with 31 per cent last year.
Notes Ms Tan Siew Lee, OCBC Bank's head of wealth management: “2022 has been a tough year for Singaporeans – probably one of the toughest in decades with inflation at an all-time high. Add to this economic uncertainty, rising interest rates and a market downturn, we truly are experiencing a year with ‘no place to hide’.”
The Index shows that the majority of Singaporeans (91 per cent) are saving at least 10 per cent of their income. But they are allocating more savings to travelling instead of investments, and retirement and emergency funds. This could be due to post-pandemic travel and spending, says the bank.
Undesirable financial habits are also on the rise, with more Singaporeans reporting that they gamble more than they can afford to lose, paying only the minimum sum on their credit cards and spending beyond their means to keep up with their peers.
Need for prudence
Ms Ho and her husband, 35, who is an account manager in a consulting firm, pays about half of their monthly home loan repayments through their CPF savings, and share the rest of the cost in cash.
Despite this arrangement and their total monthly household income of about $8,000, they are still feeling the pinch from inflation and rising rates.
The couple is adapting by adjusting their lifestyles and making compromises such as reducing the number of times they dine out every week, she says. They are also budgeting for holidays more carefully.
Ms Phang Lah Hwa, head of consumer secured lending at OCBC Bank, echoes the need for financial prudence: “To build up savings for a home, there is no magic bullet. Singaporeans must save diligently and invest prudently to amass funds to afford a home.
“The good news is that Singaporeans are good savers, and many are disciplined about sticking to their budget. This will bode well for Singaporeans who may need to tighten their belt to better meet their financial goals.”
There are also tools to help home owners better track and plan their finances, adds Ms Phang, such as the bank’s digital banking platform OCBC Financial OneView, which consolidates all their financial information on one app, and its OCBC Digital Savings Goals feature which helps to create, track and manage goals and budgets.
Those who are struggling to pay off their housing loans can approach their banks for help. Ms Phang shares that the bank offers restructuring options such as extending loan tenors or charting out a debt repayment plan to help consumers lower their monthly commitments.