SINGAPORE - While most households should be able to service their mortgages, Singapore’s central bank urged borrowers to exercise prudence to cushion against rising interest rates and inflation.
As unemployment rates remain low and wages continue to grow, most households will be able to fund their ongoing expenditures including debt payments, said the Monetary Authority of Singapore (MAS) in its Financial Stability Review 2022.
However, it warned that with rising interest rates and growing cost pressures due to elevated inflation, some households are likely to face increasing financial stress and may encounter difficulties in servicing their mortgages.
“Households should therefore exercise prudence in managing their finances, including mortgage loan obligations, to cushion against tightening financial conditions in the coming months,” it said in the report released on Friday.
Singapore households are facing higher borrowing costs as domestic interest rates have risen in tandem with global rates.
Still, the results of MAS’ stress tests show that most households appear to be resilient to income and interest rate shocks, and the proportion of non-performing mortgage loans is likely to remain low.
Mortgage rates for floating rate packages have risen to around 3.5 per cent and fixed rate packages to about 4.5 per cent this year, in line with a steep rise in Singapore dollar interbank interest rates.
The three-month compounded Singapore Overnight Rate Average (Sora), which is a key benchmark for mortgage rat...