US Fed hiked the federal funds rate to a range of between 1.75% and 2% after its 2-day FOMC, which has already been factored in by the market.  What is a little surprising but not totally unexpected is an upward revision of its forecast from three hikes to four this year.  This means we would see two more rounds of rate hikes after its FOMC in September and December later this year.  This would bring the funds rate to a range of near 2.5% – a whisker away from its long run market-neutral rate of 2.9%.

“Economic activity has been rising at a solid rate,” said the Fed, a positon that reflects the overall sentiments from committee members who believed that the tax cuts and a tight labour market would spur wage gains and drive inflation further up this year.

Other key highlights from the Fed statement:

• GDP forecast for 2018 is raised slightly from 2.7% to 2.8%
• Unemployment to drop to 3.6% by year-end
• Forecast core inflation to rise up from 1.8% to 2% by year-end
• Ups forecast of rate hikes from 3 to 4 this year, but maintains forecast of 3 rate hikes in 2019

We see US Fed here showing a resolve to normalize rates and move it quickly up to the longer run forecast of 2.9% by 2019 before it moderates the pace of rate hikes.  This is so as to “get ahead” of any inflation over-runs later which would require aggressive hikes to bring it under control and hence trigger a hard landing.

At the start of the year when most analysts are forecasting 3-month SIBOR (Singapore Interbank Offer Rate) to hit 1.7-1.8% by end of the year, we forecast it to break 2% barrier.  That was based on a scenario of 3 rate hikes from Fed.  With an additional hike in 2018 now, we seemed to be on track for our SIBOR year-end target.  3-month SIBOR is now at 1.51% (as at 6 Jun).

After June FOMC, we now maintain our forecast that SIBOR will cross 2% by end of 2018 and in-line with US Fed’s forecast, we raise our forecast for the total of number of rate hikes this year from 3 to 4.

If we are right again in our forecast this year, what this means is that by 2019, the prevailing interest rate for mortgages in Singapore would go up to around 2.2% with fixed rate going up to around 2.3-2.5%.  This creates an opportunity now for homeowners to act quickly to lock down fixed rates still hovering in the 1.75-1.80% range, but not for very much longer.

And there is no better time than now to do a quick review of your mortgage and refinance to the best fixed rate package out there with our newly-launched Zero-Cost Refinancing programme.  As long as your loan is above $500,000, and the property valuation is up to $1.5M we will make it absolutely zero “out-of-pocket” expenses when you make the switch, provided of course that there is interest savings to be reaped.  Finer terms and conditions apply. Find out before deciding on home loan refinance.  Even for those with bigger units and higher valuations, the additional costs is usually $50-$200 for most.

For the best Singapore home loan rates, speak to our very experienced mortgage consultant.  Take action today, especially those who will be out of lock-ins within the next 6 months.

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest trends in the industry, providing useful mortgage tips, and making sense of rate movements. We aim to build trust with clients for longer term partnership and not just do product-pushing for a one-time deal unlike bankers. That’s why we always present “whole-of-market” perspective including packages that banks do not pay us. That’s why many have chosen to work with us in the end notwithstanding the sheer number of brokers and agents out there.