That’s the million-dollar question right now when it comes to mortgages.

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There’s no easy answer.  Here at MortgageWise, we do help our clients made that tough decision with a framework, and by factoring new data and Fed rhetoric that comes in from every FOMC meeting.  Speak to our consultants to find out more.

Fed has officially paused in June with fed funds rate staying at 5.25 per cent but continues to talk hawkish and now projecting two more hikes for it to reach 5.60 per cent before the end of the year.  What does that mean for us?

As far as we are concerned, June FOMC was a non-event as Fed has effectively telegraphed for it to be a pause before the meeting.  What’s more newsworthy is the next one in July which Fed calls it a “live meeting”.  We think they will move another 0.25% simply because there are just four FOMC meetings left in the year and they’ve got to do it fast if they are going to do it.  We do not expect inflation numbers to change much, not until the end of Q3.

No matter whether this is a pause or a skip, we are clearly near the end of the tightening cycle.  The truth is it does not quite matter whether Fed moves another one or two more times, SORA which most mortgages are pegged to, has also peaked in the 3.50-3.80 per cent range bound.  This means those on floating rate mortgages will be paying slightly above 4 per cent and the question is simply how long more it takes before SORA starts to dip.

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No matter whether this is a pause or a skip, we are clearly near the end of the tightening cycle.  The truth is it does not quite matter whether Fed moves another one or two more times, SORA which most mortgages are pegged to, has also peaked in the 3.50-3.80 per cent range bound.  

In fact, the questions we get asked by media these days is how low can fixed rates go which has already retreated from its high of 4.25 to 3.30 per cent – a drop of almost 100 basis points.  Banks, being able to secure lower longer-term funding costs, are rolling out red carpets to invite all homeowners to commit to lower and lower 2-year fixed rates that come with two-year lock-in periods.  Is that a wise move?

It depends on when SORA finally dips.  That will happen when the economy falters and banks become flushed with funds which they are unable to lend out.  There are some signs as it was reported recently how DBS has lent $30b to MAS as it is not finding enough opportunities to put its money to work. Singapore banks are seeing a surge in deposits from overseas as well with reopening of economies and its safe haven status. That’s probably one factor behind why banks had been able to dangle lower fixed rate mortgages with more longer-duration funding.

Singapore is not forecasting any recession this year.  It will take time for the broader economy to slow down which is looking likely to run into 2024.  With borrowing costs going higher, there are hardships in every country where households are struggling to pay higher mortgages and higher prices for everything from food to transport, even if the rate of price inflation has slowed.

Will we get to a recession?  A soft landing or a hard one?  That’s the big debate now.  As long as inflation continues to stay elevated, Fed will make sure we get a recession if that’s what it takes to bring it down.  Historically, it seems, inflation has always been tamed only 6 months into a recession.  So, brace for headwinds ahead.

Those who sense headwinds in their industry may also want to position their mortgages for the next phase in the interest rate cycle, while they still have a high income.  Speak to our consultants to find out more.  

Need more advice?  We don’t just throw you a set of rates, or get different bankers to sell to you.  Not only do we help clients navigate through Singapore mortgage rates quick and fuss-free, we show you how best to position and profit from the interest rate cycle, be it for residential or commercial property loan. Work with us today and you’ll also be helping to support our social cause!

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Disclaimer: MortgageWise.sg endeavours to bring the best insights and knowledge in our expert domain of mortgage planning to the market.  Still, all viewpoints expressed in our blog remain as opinions of the writer, and shall not be constituted as financial advice.  We cannot be held responsible in any way for any financial losses arising from your mortgage decisions should you choose to rely on any of our viewpoints and opinions.