Singapore Mortgage Market

26 July 2010 - By Mortgage One

While most part of the world's real estate are still on the down side, Singapore properties have already fully recovered and booming. Morgan Capital & Research strongly advocate that a SIBOR and SOR rate package type of mortgage would be beneficial to home buyers in 2008 to 2010 but beyond 2011, the research company is expecting an increase in the SIBOR or SOR rates.

According to the economic research data compiled by Morgan Capital & Research for financial institutions, interest rate is expected to remain low for the next half of the 2010. Its research analysts are expecting a slight increase in interest rate to occur by year end, but only a slight increase. Morgan Capital & Research adds that due to the current situation in the Europe, the interest rate hike which is expected to be in 2010 most likely be delayed for a period of around 6 months to 1 year depending on the seriousness of the European Debt crisis.

Chief Research Analyst, Mr. Tan from Morgan Capital & Research said: "We are expecting a slight slow down in the property market in Singapore and this in turns will help to maintain the low interest rate for sometime. However, if the property market continues to rise, the interest rate hike will kick in faster than expected."

The MAS controls monetary policy through its exchange rates due to Singapore's high dependence on exports and imports. During high inflation, a stronger currency helps to make imports cheaper and so eases pressure from cost push related inflation from imports.

He adds that Singapore also follow the interest rate policy of its major trading partners like USA and from the US and some of Singapore major trading partner's interest policy, we can roughly know where our local interest rates will be heading. Thus he is sure that the interest rates will remains low for the next half of the year.

Which type of mortgages should Singapore consider picking up in 2010?

There is the fixed, floating and the SIBOR/SOR type. I think it depends on which time frame we are talking about. For the immediate time frame, I think they should consider talking the SOR packages or SIBOR packages. I personally advise customer to go for the SOR rates as they are lower than SBOR now. If they are buying for investment, they should apply for a no lock in SOR or SIBOR packages as they can sell their house without a 1.5% lock-in penalty.

Now When you see the Euro crisis finally bottoming out, you should get ready for the fixed rates to hatch your risk. We believe that the interest hike may occur in 2011. You should never have too many fixed packages or SIBOR/SOR packages in a portfolio of properties. Spread out your risk, just in case you the interest rates suddenly go against your favor.