How to Handle Mortgage Stress and Reduce Debt

If you own a house, there’s likely one question on your mind: Are housing loan interest rates on the rise or falling in Singapore?

Based on the risk exposure to prolonged high global interest rates, the Monetary Authority of Singapore’s Financial Stability Review Report from November 2023 suggests that more Singaporean households may encounter increased mortgage rates in 2024.  Ongoing economic uncertainties and increasing costs are likely to hinder Singapore banks from lowering their home loan rates in 2024, despite the expected interest rate reductions by the US Federal Reserve this year.

If this is the reality, the potential for unchanged or an increase in housing loan rates could trigger mortgage debt stress among homeowners and buyers here, especially for those with less disposable income.

This article explores how to manage mortgage stress for better financial health amidst the uncertain interest rate environment in Singapore.

Related: Best Home Mortgage Loan Refinancing

How Long Will Mortgage Stress Last?

Based on the findings below from local newspaper publications, it appears that housing loan rates in Singapore may not decrease significantly in 2024. Two factors play a role in this:

Economic Uncertainty

Economic experts expect a slowdown in the global economy this year, without reaching a recession. Based on Today Online, The International Monetary Fund foresees a dip in global growth from 3% in 2023 to 2.9% in 2024. Pierre-Olivier Gourinchas, the IMF’s economic counsellor, pointed out that despite challenges like energy and food market disruptions and global monetary tightening to combat inflation, the global economy continues to grow slowly. He described the current global economic state as “limping, not sprinting.”

Rising Costs

According to the Business Times, despite potential adjustments to the Federal Reserve’s rates in the U.S., it’s anticipated that Singapore banks may not follow suit in cutting mortgage rates due to the rising costs and economic landscape. For instance, in 2023, inflation rates were influenced by the rise in the GST (goods and services tax) rate to eight per cent.

Ways To Handle Mortgage Stress or Reduce/Consolidate Debt

If you don’t want to get caught in mortgage debt stress or be held hostage by the rising housing cost in Singapore, these four tips may offer you peace of mind:

Borrow Within Your Means

Not only should you borrow less but also borrow within your affordable limits. Some homebuyers attempt to overstretch their financial commitment in the view that they will get a raise to cover for the shortfall in future, however this is a risky strategy, especially in the current financial climate.

Always use a mortgage loan calculator to find the best home loan rates in Singapore before committing to buying a property. Such calculators offer housing loan options and monthly repayment estimates so that you can make an informed decision.