6 August 2012
Editor,Voices
Today paper
Today paper
I agree with the Minister for National Development Mr Khaw Boon Wan
that Singaporeans should be prudent and avoid buying an expensive property
on a long term mortgage loan, such as the 50 year loan that is introduced
recently by a local bank.
on a long term mortgage loan, such as the 50 year loan that is introduced
recently by a local bank.
I urge the Minister to review the practice of pricing HDB flats and
the financing terms offered by the Housing and Development Board and their
partner banks.
Many Singaporeans are paying for their HDB flats on loans that stretch to
30 years and require the income of both spouses to service the loans.
Can these working people be sure that both of them can maintain their current jobs
and earning capacity over a long period?
The mortgage payments may appear to be affordable under the
low interest rate of 2.6% per annum. The current low interest
environment cannot continue forever. The mortgage payment will increase by a
hefty 26% when the interest rate is increased to (say) 4.5%, which is more
compatible with the prevailing inflation rate.
Recently, the Canadian government took the step to limit mortgage loans to
25 years to combat the bubble in property prices. I suggest that HDB should
follow this prudent example, and keep the prices of HDB prices at an
affordable level, representing not more than four years of the average combined
family income.
Tan Kin Lian
3 comments:
Governments all over The World keep pumping money into their financial systems and this will cause major inflation in the near future.
In order to mop up the liquidities, those similar Governments will increase rate to contain inflation.
House buyers should be cautious about current low intesrest rate. It might not last.
In the first few years, most of the loan payment go into interest payment. Double of interest rate your increase your morgage payment at the same rate.
Interest rates will remain low for the next decade or more.
If there is any increase, its impact will be negligible.
Based on the current loan rate at 1.5% per annum, a 100% increase in the rate will bring it up to 3%
A 300% increase will be 6%.
It is not possible for them to increase so much due to the global economy weakening. In fact, they have reduced it even further and will continue to keep it below 0.5% ( US treasury)
They have tied their own hands by printing money. Politicians are not brave to tighten monetary policies because they will lose their jobs.
Understanding this will help manage risks and expectations.
I do not reccommend buying properties but if you need one, do not be afraid of this fear that rates will go up.. it certainly will. But as I demonstrated, a 100% increase is manageable, and it is not likely they will increase it by that much, as explained.
//If there is any increase, its impact will be negligible.
Based on the current loan rate at 1.5% per annum, a 100% increase in the rate will bring it up to 3%
Anon. 4:25pm //
Base on by my calculation for a 30-years loan, if loan rate increases from 1.5% to 3%, the monthly installment will be increased by about 22.5%. This means you will have to pay $1,225 now if your monthly installment is $1,000 before the rate increases. The impact is quite significant.
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