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Fixed or Floating?

In Singapore, the current trend of fixed interest rates being lower than floating rates can be attributed to several factors:

Global Economic Conditions: The global economic landscape plays a significant role in interest rate movements. In recent years, factors such as geopolitical tensions, trade disputes, and the impact of the COVID-19 pandemic have led to central banks around the world, including the Monetary Authority of Singapore (MAS), adopting accommodative monetary policies. This has resulted in lower fixed interest rates compared to floating rates.

MAS Monetary Policy: The MAS uses the Singapore Interbank Offered Rate (SIBOR) as a benchmark for floating interest rates. However, the MAS has kept the Singapore dollar on a modest and gradual appreciation path. As a result, SIBOR has remained relatively stable or even decreased slightly, while fixed rates have decreased more significantly, leading to the current situation where fixed rates are lower than floating rates.

Competition Among Lenders: The mortgage market in Singapore is highly competitive, with banks and financial institutions vying for customers. To attract borrowers, some lenders may offer more competitive fixed rates compared to floating rates, leading to the current scenario where fixed rates are lower than floating rates.

Customer Preferences: Customers’ preferences and risk perceptions also play a role in the pricing of fixed and floating rates. In uncertain economic times, borrowers may prefer the stability and predictability of fixed rates, leading to increased demand for fixed-rate loans and lower fixed rates compared to floating rates.

It’s essential to note that interest rates are influenced by a complex interplay of factors, and predicting future movements can be challenging. Borrowers should carefully consider their financial situation, risk tolerance, and long-term plans before deciding between fixed and floating interest rates. Consulting with a mortgage financing expert can help borrowers make an informed decision based on their individual circumstances.

Wallace Tay,
SG Mortgage Planner

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