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Why many Sinkies will die if interest rate goes up....
- Thread starter BuiKia
- Start date
Once I paid about 6% on my mortgage loan .... for my semi-D, a time long ago when we pay less than $30K to hdb for a 3 room flat. Wonder what will happen to many young condo owners or buyers of resale hdb flats, when (not if) the interest rate rise above 4%, which it will. And soon.
You can't blame the PAP for that. Borrowing money is an individual choice which each of us has to take responsibility for.
The majority of Singaporeans borrow money because they want to show off.
The implementation is a failure and will do nothing much. I'm waiting for the time where the public cry loud enough that the Minister and MPs has to declare their personal interest in local property (including their wives and children).
Heard that recently the Malay channel featured a technician who owns 3 private property. He started with a 800k condo although he only earns 3k plus a month. Now he stays in one and rents out the other 2.
yes yes yes...
The full article:
Singapore households are among the most indebted in Asia relative to what they earn, according to a Standard Chartered report this week.
Households had borrowings worth 151 per cent of their annual income last year, second in the region only to Malaysia, with debt at 182 per cent of income.
This is mainly because consumers here take on large dollops of property debt, amounting to 111 per cent of household income - the highest level in the region, Stanchart said.
On the bright side, households have a robust buffer of financial assets from high savings, so their debt levels are relatively low compared to these assets, the bank added.
"We are not concerned about household solvency in Singapore," it said.
Thanks to low interest rates, the repayments that Singapore households make on loans are also among the lowest in the region as a share of income.
However, Stanchart warned that as rates rise, debt servicing may become more difficult for home owners who are over-leveraged, although current debt burdens are still manageable.
Indeed, Stanchart's data shows that the overall debt service ratio for Singapore households has been rising since 2008. But they remain moderate, with total debt repayments coming up to only 13 per cent of total household incomes, the bank said.
This is lower than in Malaysia, South Korea and Australia, although higher than in the Philippines, Japan, Indonesia, India, China and Taiwan, which have debt service ratios between 2 and 7 per cent, it added.
But the report also highlighted the danger of the rapid increase in debt levels recently.
Singapore's housing loans grew at an annual rate of 12.1 per cent between 2000 and 2012, but picked up pace in recent years to grow at an annual rate of 15.8 per cent between 2006 and 2012.
"If the economy slows and unemployment rises, debt servicing may become difficult for people who are over-leveraged and lose their jobs," said Stanchart economist Edward Lee.
"A rise in interest rates from historically low levels could have a similar effect."
As an example, if home loan rates rise from 0.9 per cent to 3.9 per cent, the monthly repayment for a $390,000 loan for 30 years on a Housing Board flat would climb from about $1,200 to about $1,800, Mr Lee said.
Assuming average monthly incomes for the 10 per cent of households just below the middle line in Singapore stay at about $7,600, their debt service ratio for this loan will rise from 16 per cent to 24 per cent.
The Monetary Authority of Singapore has recognised the risk of rising rates and last week introduced caps on total debt service ratios for property buyers. They can only take new mortgages where the total monthly repayments, including other outstanding debt obligations, do not exceed 60 per cent of their monthly income.
Economists such as Bank of America Merrill Lynch's Chua Hak Bin believe that Singapore's debt levels, while high relative to Asia, are not at a dangerous point.
He noted that risks from rising debt are countered by "reassuring signs" such as falling Housing Board loans, rising Central Provident Fund balances, rising deposits, and hints that overall mortgages will start to grow more slowly.
"If carefully managed, risks from rising household and mortgage debt should be contained and will not escalate into a more systemic problem," he said.
Singapore households are among the most indebted in Asia relative to what they earn, according to a Standard Chartered report this week.
Households had borrowings worth 151 per cent of their annual income last year, second in the region only to Malaysia, with debt at 182 per cent of income.
This is mainly because consumers here take on large dollops of property debt, amounting to 111 per cent of household income - the highest level in the region, Stanchart said.
On the bright side, households have a robust buffer of financial assets from high savings, so their debt levels are relatively low compared to these assets, the bank added.
"We are not concerned about household solvency in Singapore," it said.
Thanks to low interest rates, the repayments that Singapore households make on loans are also among the lowest in the region as a share of income.
However, Stanchart warned that as rates rise, debt servicing may become more difficult for home owners who are over-leveraged, although current debt burdens are still manageable.
Indeed, Stanchart's data shows that the overall debt service ratio for Singapore households has been rising since 2008. But they remain moderate, with total debt repayments coming up to only 13 per cent of total household incomes, the bank said.
This is lower than in Malaysia, South Korea and Australia, although higher than in the Philippines, Japan, Indonesia, India, China and Taiwan, which have debt service ratios between 2 and 7 per cent, it added.
But the report also highlighted the danger of the rapid increase in debt levels recently.
Singapore's housing loans grew at an annual rate of 12.1 per cent between 2000 and 2012, but picked up pace in recent years to grow at an annual rate of 15.8 per cent between 2006 and 2012.
"If the economy slows and unemployment rises, debt servicing may become difficult for people who are over-leveraged and lose their jobs," said Stanchart economist Edward Lee.
"A rise in interest rates from historically low levels could have a similar effect."
As an example, if home loan rates rise from 0.9 per cent to 3.9 per cent, the monthly repayment for a $390,000 loan for 30 years on a Housing Board flat would climb from about $1,200 to about $1,800, Mr Lee said.
Assuming average monthly incomes for the 10 per cent of households just below the middle line in Singapore stay at about $7,600, their debt service ratio for this loan will rise from 16 per cent to 24 per cent.
The Monetary Authority of Singapore has recognised the risk of rising rates and last week introduced caps on total debt service ratios for property buyers. They can only take new mortgages where the total monthly repayments, including other outstanding debt obligations, do not exceed 60 per cent of their monthly income.
Economists such as Bank of America Merrill Lynch's Chua Hak Bin believe that Singapore's debt levels, while high relative to Asia, are not at a dangerous point.
He noted that risks from rising debt are countered by "reassuring signs" such as falling Housing Board loans, rising Central Provident Fund balances, rising deposits, and hints that overall mortgages will start to grow more slowly.
"If carefully managed, risks from rising household and mortgage debt should be contained and will not escalate into a more systemic problem," he said.
The debt is going up even higher for the next 2 months as Muslim fast and change their car, furniture, etc. for the Hari Raya.
its all part of the plan to feed the bankers, keep the people enslaved to their jobs and give them a "Stake" in the country.
can you imagine 1 or 2 million debt-free sinkies running around cursing the government?? such unimaginable chaos. better to keep them all heavily in debt and at work.
the price of land in singapore could be $1/sq ft. but dear leader decided to give everyone a stake in the country... the rest is history.
I used to work at a place where the Malaysian chinese office boy owned 2 condo's in Malaysia. In Spore he would go around in his scooter doing errands & you would often see him taking it easy between his errands reading the papers
Back then he would have been paid from SIN$1,000 to 2,000 in Sing$. In Malaysia that would be considered a very decent middle class salary. Many Sporeans wouldn't want his job as an office boy but for a Malaysian it was more than enough to buy a few condos
20 years ago only the poor sinkies buy 3 room flats. Now at 300k plus for 3 rooms, only middle income can afford. But if he can still be employed in is 40s.
I wonder where all the youngsters going to live cum 10 years from now.
I wonder where all the youngsters going to live cum 10 years from now.
In May 2013, US 10-year Treasuries was at 1.65%.
Right now, it is at 2.47 %. Bernanke could be gone soon. A new moderate Fed chief may not want to have such a big book in the central bank. If this is the case, the FED may be less supportive of aggressive quantitative easing. Interest rate may go up further, even possibly to 3.5 - 4%.
I am really looking forward to this as the fixed deposit rates will be more attractive
Right now, it is at 2.47 %. Bernanke could be gone soon. A new moderate Fed chief may not want to have such a big book in the central bank. If this is the case, the FED may be less supportive of aggressive quantitative easing. Interest rate may go up further, even possibly to 3.5 - 4%.
I am really looking forward to this as the fixed deposit rates will be more attractive
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I still waiting for COE to drop
thank you for politi ... , what was that word that eEro69 used ?
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