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Here's what will happen if mortgage rates really rise 30-40bps
Mortgage servicing ratio will be affected.
According to Barclays, should rates rise 30-40bps within a year, say from 1.5%, for a 30-year S$800k loan assuming an 80% LTV on a S$1mn loan, its Mortgage Servicing Ratio (MSR, or the ratio of income paying the monthly mortgage), now at 28% of a S$10,000 household income, would rise 5% or just 1ppt to 29% of income.
"Should rates double to 3%, MSR would rise 22% or 6ppts to 34%," it said.
Barclays rates team continues to expect underlying SIBOR rates, which tracks US rates, to remain low.
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