Factors that Affect Mortgage Interest Rates  

We have to accept that buying a house is not as easy as we expect it to be. There are many things that we need to consider. Oh, how complicated it is being an adult! If we have enough cash to pay the house in full, of course it is better to get into it right away. This is better than paying monthly rentals or mortgages.

However, if we do not have enough money to pay in full, we have other options to consider. No matter what happens, we have to secure a house for the sake of our future family. In this case, we can consider mortgages. There are many people that can help us decide and if we consider mortgages, it is better that we know things about it so we will understand how it works.

When we hear mortgages, it refers to the agreement in which a person borrows money to buy a property and pays back the money over a period of years. Here in Singapore, mortgage interest rates rise and sometimes we do not know the reason why. This is the perfect time to know factors that affect mortgage rates. Here are some:

• Risk to capital: If the lender (bank or other financial organizations) have reasons to perceive that there is a higher default risk on the capital that they lent to us, they will mandate higher interest rates. Higher default risk can come from blows to Singapore’s financial system.
• Government intervention: We have to know that Singapore’s Central Bank has the power to intervene overnight in funds market. The intervention will then affect the lending rates of other banks.
• Cross border interest rates: The major economies in the world are interlinked. Regulations and policies in neighbouring countries may affect us. Remember that if the interest rates are increasing worldwide, all economies will be affected and follow the trend.
• Core inflation: Core inflation gauges inflation over a longer period of time. Core inflation covers continual basket of goods. If the core inflation is rising, it can grind down the purchasing power which will eventually lead to intervention. Intervention is by way of increasing the interest rates.

Now that we know some factors that affect our mortgage rates, we can now understand its inner workings. We can only pray that the market will be constant or if not, we can only hope that we can cope. If we want more explanation, we have to approach the right people. For more information, we can always ask questions.