CNA Explains: Should Singapore homeowners review their mortgages after the Fed’s rate hike?

Mr David Baey, CEO of mortgage broker Mortgage Master, therefore expects fixed home loan rates to go up by slightly over 0.5 percentage points.

Banks will want to raise their rates slightly more than the Fed to capitalise on the increased demand for fixed-rate loans, he explained.

However, Mr Goh cautioned against assuming that another hike this year was a done deal, noting that policymakers’ views can change as economic and geopolitical conditions evolve.

Is it better to get a fixed or floating home loan now?

There is no single package that is best for every borrower, analysts said, adding that borrowers should consider several factors.

A fixed-rate package gives homeowners certainty over their monthly repayments during the fixed-rate period.

Mr Chia said this may be more suitable for homeowners who do not intend to sell their property in the short term, want stable monthly repayments or have limited room in their budgets to absorb further increases.

A floating-rate loan, meanwhile, may suit borrowers who plan to sell in the short term and can accept some volatility.

It could also appeal to borrowers who expect rates to decline over time and are prepared to accept the risk that they may instead rise further.

Such loans may also provide greater flexibility, depending on their package terms, Mr Chia said.

Another factor to watch is how SORA responds to the Fed’s rate hike, Mr Goh told CNA, adding that he does not expect a big change.

Mr Baey, who believes the economy is headed towards a recession, said he favours fixed-rate loans that do not extend beyond a two-year lock-in period. This would give borrowers an opportunity to reassess their mortgage after two years and potentially benefit if interest rates are lower by then.

The decision ultimately depends on each homeowner’s circumstances.

“Ultimately, the decision should be based on the homeowner’s cash flow, risk tolerance, plans for the property and expectations about how long they will keep the loan,” Mr Chia said.