Buying a house is never cheap, whether it is brand new or old. Especially if it is in a good location like in a commercial area or an executive village. That is why most people turn to home loans when it comes to buying a property. Here in Singapore, mortgage rates depend on the economic factors such as inflation, economic growth and the market. High mortgage rates caused some people to refinance their mortgage rates wherein they are engaging to a new loan in order for them to pay off the initial or existing debt which is something that lessens the interest. A lower mortgage rate can really be helpful especially for those people who are spending a huge amount of money in terms of mortgage.
But how exactly do mortgage rate increase?
First off, let us start with the economic growth. The economic growth is directly affected by two things. The gross domestic product, which is the total monetary value of goods and services that are produced in the country, and employment rate which is pretty much self-explanatory. These things affect how much people buy different stuff for such as clothes, food, and other services. The bigger the growth in the economic level, the bigger income people get. In turn, more and more people looking into getting a mortgage loan can increase its rate - due to the demand and other variables such as the available budget of the lenders.
Another important factor is inflation. If the lenders are not able to get enough money or revenue from their interest rates then it could cost them a lot due to the fact that inflation affects the purchasing power of the currency since the its rate is the level where all general products, goods, and services increase. Interest rates must be maintained with concern to the inflation rate to make sure that the right amount of profit is made.
One other big factor is the housing market condition. It can definitely affect mortgage rates directly since if there would be less houses that are sold or being built, then there would be less demand for mortgages. This factor mainly revolves around the demand or amount of people actually buying a home. For example, if people are spending money in renting instead of actually buying a house, then it could cause less demand for mortgage, affecting the mortgage interest rate.
Other factors that may affect your mortgage rate are the following:
Down payment - the initial down payment that you make can, of course, directly affect the interest rate for the mortgage itself. If you are able to shell out more money than required for the loan, then it is a lot better to do so in order for you to be able to save up in the long run by getting a lower interest.
Fixed or adjusted - Fixed home mortgage rates are, basically, fixed rates. They do not change whatever changes may happen in terms of economic factors like inflation and economic growth. However, adjustable rates might go higher depending on the main economic factors mentioned above.
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