With interest rates as low as 1.3%. What does it mean for you?

Updated: Nov 18, 2020

The US Federal Reserve has cut rates twice during this Covid-19 pandemic impacting Singapore's rates

The Covid-19 pandemic has had a global economic effect causing stock prices to fall, the travel and tourism industry to be badly affected, supply chains taking a hit and the retail sector seeing a drop in sales.

In an unprecedented move, the US Federal Reserve has cut interest rates due to the virus outbreak. This has sent interest rates comparable to that of the 2009 Global Financial Crisis. Based on SIBOR rates, interest rates has dropped to a low of 1.3% for mortgage loans.

Source: Propnex Research

A drop in interest rates

So what does it mean with the drop in interest rates? For those who currently own a property, when interest rates drop, some would consider refinancing their existing home loans. A small change in interest rates can mean saving hundreds of dollars throughout the tenure of your home loan. However, there are other costs (home valuation, cancellation fee etc) in relation to refinancing your home loan but typically, refinancing your home loan is common in Singapore. 

This change in interest rates can also affect your finances and also mean a lower monthly instalments for homebuyers. Generally, lower interest rates would encourage buyers/ investors to purchase a home due to savings on interest payments.

Taking advantage of the current market situation

Now some of you may be wondering if now is the time to enter the property market with the drop in interest rates to a low of 1.3%.

Here were the market update in the last quarter.

1. New home sales up 114% in Feb, amid virus outbreak

"Singapore's new home sales last month surged more than 114 per cent from a year ago, defying the coronavirus outbreak and a looming global recession.

Posting the second-strongest February sales performance in eight years, developers moved 975 private homes - up 57.3 per cent from the 620 units they sold the month before, driven by competitively priced new projects. The latest figure is also 114 per cent higher than the 455 units developers sold in February last year."

Source: The Straits Times

Graph shows an increase in private new home sales in February 2020

2. Wing Tai sells 70% of The M over launch weekend

Developers are also strategically pricing their projects to attract more buyers. 

"Many of them were drawn to The M's prime location in the Ophir-Rochor Corridor, which is rapidly transforming into a vibrant, mixed-use and eventually car-lite district, our unique work-life design concept and our reasonable pricing," she said.

Source: The Straits Times

Source: The Straits Times

Singapore's real estate market continues to be resilient and sustainable amidst the impact of the Covid-19 virus.

As a whole, with adequate research and data you may be able to capitalise from this drop in interest rates. Even in a crisis, there is always room for opportunity for investors who seize the moment.

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