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U.S. is dropping the interest rate, how’s it affecting the Singapore Property Market?


The US Federal Reserve recently cut interest rates by 0.5%. This is a big move, as the Fed typically raises or lowers the interest rate in smaller increments (0.25 per cent).


The past 4 years of the US federal funds rate

Federal Open Market Committee (FOMC) Meeting Date

Rate Change (bps)

Federal Funds Rate

18 Sep 2024

-50

4.75% to 5.00%

26 Jul 2023

+25

5.25% to 5.50%

3 May 2023

+25

5.00% to 5.25%

22 Mar 2023

+25

4.75% to 5.00%

1 Feb 2023

+25

4.50% to 4.75%

14 Dec 2022

+50

4.25% to 4.50%

2 Nov 2022

+75

3.75% to 4.00%

21 Sep 2022

+75

3.00% to 3.25%

27 Jul 2022

+75

2.25% to 2.50%

16 Jun 2022

+75

1.50% to 1.75%

5 May 2022

+50

0.75% to 1.00%

17 Mar 2022

+25

0.25% to 0.50%

16 Mar 2020

-50

0% to 0.25%

4 Mar 2020

-50

1.0% to 1.25%

This is expected to have a ripple effect on interest rates in Singapore, likely leading to lower home loan rates as they align with the U.S. trends. This means that borrowing money is cheaper, so it's likely that home loan rates in Singapore will go down too. As a result, the property market here might change, especially when it comes to how much it costs to buy a home and invest in real estate.

What To Expect After The US Interest Rate Cut:

  1. Lower mortgage rates, lower home loan monthly installment When the U.S. Federal Reserve cuts interest rates, it usually means that Singapore's banks will follow suit. This means that people who have loans to buy a home might pay less each month. For people who are buying a home for the first time or looking to refinance,  lower interest rates can be a big help. It makes it easier to get a loan and can make buying a home more affordable. If you already have a home loan with a fixed interest rate, you might not see a change right away. But if your loan is coming up for renewal soon, it might be a good time to think about refinancing to get a lower interest rate. This can save you a lot of money, especially if you have a big mortgage.



  1. Increase in property demand due to more affordable monthly installment Imagine this: You're thinking about buying a home, and suddenly, it's a bit cheaper to do so. That can be super exciting!  When interest rates go down, people are more likely to want to buy a home because it costs less. A big cut in interest rates in the U.S. could make people in Singapore even more interested in buying a home. They might rush to buy before the rates go up again, especially if they think the economy is going to get better. This could lead to more competition for homes, especially in popular neighborhoods. In areas where there are already many people looking to buy a home, prices might go up quickly. This is because there might be more buyers than sellers, giving sellers more power to negotiate higher prices. Luxury homes and prime residential areas are especially likely to see price increases during this time.


  1. Rise in property prices due to higher demand If more people are interested in buying homes, sellers might have a good time selling their properties. When it's easier for people to afford a home, there's usually more competition, so sellers can get higher offers and sellers might increase their asking prices as they see more interest from buyers. This is especially true in areas where there aren't many homes for sale.

When interest rates fall, home prices usually increase, but it's unlikely they will surge as they did during previous low-interest periods. However, cheaper loans could help sustain the gradual rise in prices.

Even though interest rates are lower, property prices and rent in Singapore have been going up. The market is still very competitive, and this trend is likely to continue. If you're thinking about buying a property, it's important to be strategic.

The recent changes in interest rates offer some valuable lessons for anyone investing in property or managing loans. It's important to be patient and not spend more money than you can afford because interest rates could go up unexpectedly. Even though interest rates are expected to stay low, it's always a good idea to be prepared for changes in the economy. If the economy doesn't grow very much or there's a lot of uncertainty in the global market, people might be less confident and invest less.

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