Rates gaming on mortgage relief in Singapore set to unwind

Published Wed, Nov 11, 2020 · 09:50 PM

ON THE surface of it, having S$29 billion or about 15 per cent of outstanding mortgages in Singapore at end-August under deferred payments, should ring some alarm bells.

But that headline figure masks some rates-arbitrage that has been taking place.

This is very likely in the regulators' careful supervision, as they introduced income impact as a qualifying term for mortgage moratoriums from this month.

The arbitrage attraction is clear. One mortgage promotion today is being sold at below 1 per cent to well-heeled borrowers. It reflects the collapse in benchmark rates and how banks are eager to dole out home loans that are secured against property collateral.

Even if borrowers are not enjoying sub-one per cent rates, home loans today are at roughly below 1.5 per cent. The three-month Singapore interbank offered rate early this month was decidedly under 0.5 per cent. At the star…