Central banks around the world have been tightening monetary policy to combat surging inflation.
The US Federal Reserve, in particular, has been on a rate-hike race to combat inflation at its highest in 40 years. Its latest move – a 75-basis-point rate increase on Sep 21 – marks its fifth rate hike this year, with further increases likely, to rein in soaring prices.
Amid this, banks have been making rapid revisions to their borrowing rates and for home loans, fixed rate packages have seen bigger adjustments.
Mr Paul Wee, vice-president of PropertyGuru Finance at PropertyGuru Group, said local banks are likely to continue offering fixed rate mortgages, although rate reviews will be inevitable amid uncertainties in the outlook of global interest rates.
“Banks must cover or hedge their exposures against rising interest rates when offering a fixed rate package. The closer the fixed rates are to the current interest rates, the higher the cost of hedging,” he explained.
“The hawkish stance taken by the US Fed means that it is unclear how high interest rates can go. At this point, the banks are taking time to assess these risks to price their fixed rate products better.”
On the other hand, hedging is not applicable to floating rate packages as the higher rates are passed on to consumers, he added.
Meanwhile, the Singapore Government unveiled a slew of property cooling measures last week, in its bid to moderate demand and ensure prudent borrowing.
The measures, which came into effect on Sep 30, include revised medium-term interest rate floors, a higher interest rate floor for housing loans granted by HDB, as well as a wait-out period of 15 months for private home owners to buy a non-subsidised HDB resale flat.