Mortgages Uncovered

Manager of the mortgage broker Savills, Miranda John, commented recently on the Singapore mortgage:

“The domestic interbank rate in Singapore, as determined by the Monetary Authority of Singapore, starts from an overnight rate of 0.5% up to around 0.80% on a three-month basis. With rates under 1%, understandably a currency mortgage is an interesting prospect, along the same lines as Japanese Yen mortgages were a few years ago. However, the availability of currency mortgages has always been limited, both in the number of banks willing to lend on this basis and in the criteria lenders apply.”

Those who are the more specialist brokers / lenders will aim their more sophisticated products at the people that they consider to be high earners who also have substantial property and may also be likely to make additional stipulations such as a regular monthly income stream in the same currency that you wish to borrow in.

We are currently in an age that is rife with volatile currency and flagging financial markets so it is particularly important to be fully aware of any of the pitfalls of these types of mortgages. Should your income be in one currency, as an example, sterling, then your mortgage will be in a second currency and you will be directly affected by the rapidly changing international exchange rate movements.

Should sterlings value fall against the SGD then you will have to pay more towards your mortgage per month because the sterling equivalent of your monthly repayment fee will increase along with the sterling equivalent of any of your mortgages’ outstanding balance.

The main risks to consider are that even if Sterling does strengthen you have to out weigh any losses against the gains and there is also a chance that any low interest rate you may have had could easily be wiped out completely due to the exchange rate fluctuation and there is very little no absolutely no advanced warning when this happens.