Home loans interest are as high as 2.18% as banks decide to increase mortgage rates again. In a short period of 8 months, certain banks have jack up home loan interest by 0.80%. The introduction of new property ruling coupled with rising interest rates, declining property rental yield and higher home vacancies raises the risk of defaults in investment properties as borrowers may not be able to cover the higher servicing costs.
Since year 2009, the property market has a theory – ” Let the rent pay the housing loan”. The hike of the home loan interest and decrease of property rent has proven the theory wrong.
With the hikes from the US Fed Fund Rate and the expectation of further hikes in the near future, market interest rates have been rising. The movement of the Fed Rate will translate to an increase in mortgage loan rates. Not so long ago, both DBS and OCBC were charging 1.75% cent a year for each of the three years of their 3-year fixed rate packages in end-November 2017. Now, DBS Bank is now charging 1.95% a year for each year for its 2-year fixed rate package and OCBC has increased its 2-year fixed rate package to 2.18% a year for each of the two years.
A combination of rising interest rates, lower rentals and introduction of new property ruling will ease the fever of property buyers for the time being.