As interest rates continue to rise, homeowners are expected to brace for higher borrowing costs
Singapore. On Thursday, Minister of State for Trade and Industry Alvin Tan shared that 1 in 3 homeowners with outstanding mortgages from banks and other financial institutions will be affected by the skyrocketing interest rates.
“As rates continue or could continue to remain high beyond the next two to three years, all households will face higher borrowing costs than today and should therefore exercise prudence in their new borrowings,” he said.
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But despite this, the household debt situation in the country remains healthy. Since 2021, the number of foreclosures has been decreasing. This year, less than 30 foreclosures were made.
Mr Tan also added that MAS is not expecting widespread foreclosures in the coming years.
“The situation, in fact, reflects in part the measures we have put in place over the years to limit the amount one can borrow to buy property, including our recent further tightening of these limits.”
According to the stress tests done by MAS, most households should still be able to pay their mortgages in cases of further income losses and interest rate hikes. However, a relatively small number of households may feel more constrained.
The stress tests assessed the ability of people to repay debts based on their income. However, it doesn’t take into consideration household savings (such as CPF) that provides an additional financial buffer.
When asked about when the government will come and assist companies that face insolvency, Mr Tan replied that most Singapore-listed firms still hold sufficient liquidity in the first half of 2022.
He also added that most firms have a healthy debt servicing ability/sufficient cash to cover their operational and financing needs.
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