WhyItMatters

Keep an eye on mortgage rates

Interest rates in Singapore are set to continue rising gradually over the next year, after the United States Federal Reserve made a widely anticipated move to raise rates last week - its third this year.

This time around, the Fed hiked rates by 25 basis points to a range of 1.25 per cent to 1.5 per cent.

Rate hikes will likely be a regular feature of the United States economy next year, with three hikes said to have been pencilled in.

Local home loan rates have already been rising over the past several months, in the wake of the Fed's earlier rate hikes.

DBS Bank, OCBC Bank and United Overseas Bank (UOB) - the biggest players here - have increased the interest rates on their fixed-rate and floating-rate packages since last month.

DBS and UOB have jacked up the interest rate on their three-year fixed-rate loans by 10 per cent a year. The fixed-rate packages now sell for 1.85 per cent a year for each of the three years. In October, less than two months ago, the rate was 1.68 per cent.

The three-month Singapore interbank offered rate (Sibor), the benchmark interest rate to which home loans are pegged, has climbed from just under 1 per cent in January this year to above 1.2 per cent last week, and is poised to rise towards 1.85 per cent by the end of next year, UOB economist Alvin Liew said.

This means home buyers and home owners looking to refinance their mortgages might want to act soon, before interest rates rise further.

It is also time to consider more closely whether a fixed or floating-rate package would work best.

Mr Darren Goh, executive director of mortgage broker MortgageWise.sg, has recently been urging home buyers to secure their rates for refinancing or new purchases. In a Nov 30 posting on his blog, he said: "Know that the prevailing mortgage rate has risen by approximately 20 basis points since the start of November to 1.6 for fixed-deposit-rate home loans and to 1.4 for Sibor home loans now.

"Fixed rates are also highly recommended for that peace of mind in the midst of a rising interest rate environment in the next few years." 

A version of this article appeared in the print edition of The Straits Times on December 20, 2017, with the headline 'Keep an eye on mortgage rates'. Print Edition | Subscribe