SINGAPORE: The Monetary Authority of Singapore (MAS) has cautioned that more Singapore households may encounter escalating mortgage rates in the upcoming year. This alert stems from the perceived risk of prolonged high global interest rates, as outlined in MAS’s annual financial stability review report released this week.
The report reveals a notable trend that has unfolded since the second half of the preceding year. With the simultaneous surge in mortgage interest rates and property prices, monthly mortgage instalments for households seeking new home loans have experienced a significant uptick.
Despite this, the central bank assured that the overall financial health and solvency of local households remain satisfactory.
A noteworthy concern highlighted in the report revolves around the existing fixed-rate loan portfolio. If the trajectory of mortgage interest rates continues its ascent compared to the previous two years, approximately 10 per cent of local households with mortgages may witness an immediate surge in their monthly mortgage instalments upon refinancing in the coming year.
However, stress test results conducted by MAS indicate that while households with recently acquired mortgages may grapple with heightened debt repayment pressure due to larger outstanding loan amounts and escalating real estate prices, the overall risk of default remains low. This reflects, to a significant extent, the efficacy of measures implemented by MAS over the years in mitigating financial risks in the housing market.
MAS officials underscore the importance of prudence and financial planning for households in light of the potential rise in mortgage rates. They recommend that individuals consider their financial capacity and explore appropriate measures, such as fixed-rate mortgages or financial counselling, to navigate potential challenges.