Soaring Mortgage Prices: Outlook And Advice To Homeowners

Soaring Mortgage Prices: Outlook And Advice To Homeowners

Mortgage interest rates have soared to a new high in October, worrying home buyers and owners alike. Back on 4th October 2022, major banks in Singapore, including DBS, UOB, and OCBC, raised their fixed rate home loans, the highest of which reached 3.85%. Some analysts report this to be the highest rate ever since the recession in 2008.

This comes amidst a buoyant housing market in Singapore after tiding through the worst part of the pandemic. Home sales have climbed this year, with September’s private home market hitting 987 sales, the second-highest this year.

However, HDB housing agents in Singapore are expecting the wave to be dampened with a less optimistic outlook for the final quarter of 2022, with news of rising mortgage prices as well as the recent announcement of property cooling measures.

Why home loan interest rates have risen

Home loan interest rates in Singapore are based on the Singapore Overnight Rate Average (SORA) and the Singapore Interbank Offered Rate (SIBOR), closely tied to global interest rates. This time, Singapore’s mortgage rate hike was made in response to the US Federal Reserve’s raising of its benchmark interest rates.

Earlier in June 2022, the US central bank raised their interest rates to 75 basis points, the largest spike since 1994. Another price hike came in July 2022, with more possibly to come. The recent interest rate hikes by the US central bank are part of their bid to rein in inflation, which resulted in knock-on effects on interest rates in Singapore.

As a result, many homeowners and buyers in Singapore are already beginning to reconsider their housing loan options, even as those on floating home loans see their interest rates rise.

Will interest rates continue to rise?

It seems that October is only the early sign of more interest hikes in the coming months. From what we know, the US Fed’s hawkish stance means that a sustained hike in interest rates will be likely. Forecasts expect the Fed to increase rates to 4.4% by end-2022 before peaking at about 4.6% in 2023.

The implication for Singapore is that local banks have already raised their rates, and those that have not already done so will also start to match the trajectory in their fixed home loan interest rates accordingly in anticipation of the higher rates in the coming year or two.

Those hoping the situation will turn around soon may not get the answer they were looking for. It all boils down to how the economy fares: If the interest rate hikes in the US achieve their purpose of easing inflation, the central bank may cut rates as early as the following year. Nevertheless, other factors like ongoing global tensions and political instability may contribute to sustained or further climbing rates.

What you can do as a homeowner or buyer

Singaporeans most affected by the price hikes would be home buyers or those already on floating home loans. If you belong to one of these groups of people, it’s natural to feel at a loss for what to do. Now is the time to equip yourself with as much information as possible and pick the best option for your unique situation.

Here is some very general advice:

  • Always buffer for emergencies

Calculating the most suitable home loan starts with understanding what you can afford. But don’t choose a loan that will max out your spending power, as you will never know what might happen next. Interest rates can rise unexpectedly, or you may fall on hard times. Instead, be wise and account for a larger margin of safety when picking out a new home loan.

  • Choose low-risk options

Since you know interest rates are likely to go even higher, you want to lower your risk by picking a loan that will lock in the lowest possible rate for this current market. Consider refinancing to a fixed-rate loan package to counter higher rates in the near future. It is also good to check out floating rate packages that have a cap on maximum interest rates during the lock-in period, but make sure to check the terms and rates for after the lock-in period. Another strategy you may want to try is splitting your home loan into two, essentially diversifying your portfolio and splitting your risk.


The property market is at a volatile stage currently, and some may choose to wait it out and find alternatives instead of buying a home right now. Yet, some people are in situations in which they have no choice but to find a new home. If you play your cards right, there could even be a way to take advantage of the current climate to find a good deal!

If you find yourself in a situation where you need property advice, turn to a trusted property real estate agent in Singapore. You can book a free no-obligation consultation with multi-award-winning housing agent Joel Choy to gain his insights and form a better understanding of what you should do. What are you waiting for? Call now to achieve your housing goals the faster and wiser way!