Most Singapore households able to continue servicing mortgages amid rising interest rates
Most Singapore households able to continue servicing mortgages amid rising interest rates. Most Singaporeans can continue to service their mortgages for their homes despite rising interest rates, ministers said Parliament on Thursday (Oct 10).
The Monetary Authority of Singapore (MAS) stress tests show that most homeowners are able to service their home loans, although “a relatively small number may be more constrained,” according to Alvin Tan, Minister of State for Trade and Industry. According to him, these stress tests looked at debt repayment ability based on income and omitted financial buffers like savings. Further interest rate hikes and considerable income losses were tested, “even with a 400 basis point increase and a 10% fall in income.”
Tan was replying to queries on the number of homeowners with private financial institution loans who had been affected by interest rate increases, as well as the risk and extent of foreclosures in the near- to medium-term. As of the second quarter of 2022, one in every three homeowners with outstanding mortgages from financial institutions (FIs) is on mortgage packages that fluctuate in line with market interest rates. “These borrowers’ mortgage payments have already increased in recent months,” Tan said. The loans of the remaining borrowers are fixed, or fixed for a period of time, or track market rates with a lag.
“The proportion of non-performing mortgages among FI loans is minimal, at 0.3%,” Tan noted. In reality, the number of foreclosures has been declining since 2021, and has remained low at less than 30 units so far this year. In the short to medium term, MAS does not anticipate widespread foreclosures.” Approximately 80% of public housing flat owners with FI loans are on mortgage packages that mirror market interest rates, but with some lag.
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