Homeowners in Singapore to spend more of monthly income on mortgage: Moody’s
HOMEOWNERS in Singapore are spending more of their monthly income on mortgage repayments, according to a Tuesday (Oct 25) report by Moody’s Investors Service.
Based on figures from the ratings agency, first-time private residential homebuyers needed 19.4 per cent of their average monthly household disposable income to meet the mortgage repayment on new loans in August 2022. This is an increase from the 17.3 per cent for December 2021.
“We expect this measure of housing affordability will continue to worsen over the next 12 months, because gradual income gains will not be sufficient to offset interest rate rises and property price increases,” said Moody’s.
The worsening housing affordability is credit-negative for Singapore and will, in turn, increase risks for mortgage-covered bonds, it added.
The agency also noted that around half of mortgages in Singapore are floating-rate loans – and these rates are likely to increase as interest rates continue to rise, largely influenced by the Federal Reserve’s restrictive monetary policy to ease inflationary pressures.
In September 2022, for instance, the Fed raised interest rates by 75 basis points for the third consecutive time.
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“(This) signalled even more aggressive hikes ahead to ease inflation,” said Moody’s. “We expect the Federal Reserve to continue to maintain a restrictive monetary policy stance through 2023 and be averse to loosening financial conditions prematurely.”
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