SINGAPORE: If you are a current home owner or wish to buy your first home in Singapore next year, you may be affected by the continued rise in mortgage rates as a result of the US Federal Reserve increasing interest rates.
Lenders take their cues from the US Federal Reserve, which lifted the benchmark lending rate by 0.5 percentage points on Wednesday (Dec 14) in a bid to tame inflation. Fed Chair Jerome Powell warned that there is still "some ways to go".
America's central bank has hiked rates seven times this year, with its latest increase taking the benchmark lending rate to a range of 4.25 per cent to 4.5 per cent, the highest since 2007.
In their projections, policymakers expect rates would land higher than expected at 5.1 per cent next year, according to a median forecast.
HOW WILL THIS AFFECT MY MORTGAGE RATE?
The 5.1 per cent projection "does not differ much" from the market's expectation that interest rates would hit 5 per cent in 2023, said Mr Paul Wee, vice president of PropertyGuru Finance.
The latest change is unlikely to significantly impact the interest rate on mortgages, he added.
Mr Wee said that based on current conditions, the three-month Singapore Overnight Rate Average (SORA) is expected to reach 3.3 to 3.5 per cent in the first quarter of 2023.
The three-month SORA on Dec 15 was 3.0910, up from 0.1949 at the start of the year.
In Singapore, a floating home loan rate is usually pegged to SORA. The interest rates vary throughout the life of the loan, depending on the economy and market conditions.