Home loan financing knowledge gap must be bridged says new study

Ravi Philemon
·5-min read

More education is needed to bridge the home loan financing knowledge gap said a new Study

home loan financing knowledge
home loan financing knowledge

iCompareLoan’s Home Loan Report (TM)

The PropertyGuru Consumer Sentiment Study H1 2021 said that more education is needed to bridge home loan financing knowledge gaps.

The study also identified the need for greater awareness and education around home loan financing knowledge gaps, with 50% of Singaporeans indicating that their unfamiliarity with the required paperwork poses a challenge in them securing a home loan.

Other concerns include their inability to afford their downpayment (39%) and job and income stability (36%). Meanwhile, nearly 2 in 5 Singaporeans (39%) are unaware that they can refinance their home loans. This number is higher amongst Millennials (47%) compared to middle-aged and older Singaporeans (33%).

Home loan financing knowledge gap hits everyone – from boomers to Gen Z

When asked for the reasons for not refinancing their home loans, 45% of Singaporeans feel refinancing their mortgage during their lock-in period is an unwise decision, 34% perceive that a lot of effort is involved to refinance their mortgages, while 21% cited the need to pay thousands of dollars upfront when refinancing as a drawback. These findings all point to common mortgage refinancing misconceptions amongst home buyers.

Home loan financing knowledge gaps most glaring around refinancing process and benefits

Paul Wee, Managing Director (FinTech), PropertyGuru Group said, “While most Singaporeans are aware of refinancing, their level of understanding around the refinancing process and its benefits is still low, which affects opportunities to grow savings. A home loan is a long-term commitment. There is no one-size-fits-all approach, so it should be regularly reviewed, like a health check, to ensure that one’s needs are met as we move through each phase of life.”

Mr Paul Ho, chief mortgage officer at iCompareLoan, said: “I do not fault the consumers for their home loan financing knowledge gaps. The home loan financing scene is constantly changing with new Government regulations and with global trends on interest rates. This is one big reason why consumers need to work with trusted home loan specialists.”

Choosing home loan financing can be a difficult decision to make given the multitude of factors involved. This is why consumers should use readily accessible mortgage platforms with banking or independent home loan experts that can offer personalised advice and help homeowners navigate through the home loan marketplace every step of the way.

Mr Ho added, “Consumers need not feel overly anxious when they are buying a property if they do some homework and work with trusted hands who are not fly-by-night companies.”

The Study further showed that although there is an overall optimism, more than half of Singaporeans are still uncertain of future property prices and concerns over housing affordability have been raised.

The study’s overall Sentiment Index – which measures current real estate satisfaction and overall climate, housing affordability, interest rates, perceived government efforts, and property prices – rose by 2 points from 41 in H2 2020 to 43 in H1 2021. This uptick was driven by Singaporeans’ positive perception of interest rates and outlook on property prices. 56% of Singaporeans feel confident to purchase a property in the current climate.

At the same time, 56% of Singaporeans remain uncertain about future property prices and 34% are concerned about the delay in completion dates – higher among Millennials (aged 22-39) at 42%. Signs of buyer concerns over housing affordability are reflected in the study’s Property Affordability Rating, a score that measures consumers’ perception of property prices in Singapore and their ability to afford a property in the current prices and income. The rating dipped 5 points from 69 in H2 2020 to 64 in H1 2021.

Buyers feeling the pinch as property prices continue to rise

As property prices in Singapore continue to show an upward trend despite the pandemic, 84% of Singaporeans find property prices high, and fewer Singaporeans consider themselves able to afford a property with the current prices and income, down from 66% in H2 2020 to 60% in H1 2021.

Despite the various property relief measures introduced by the government, including extended support to reduce home loan payments, more Singaporeans feel that the government needs to do more to make housing affordable, up from 62% in H2 2020 to 65% in H1 2021. The rise in property prices over the last two quarters in 2020 fueled by pent-up demand post-circuit breaker could have prompted Singaporeans to call for further ease in buyer’s stamp duty (BSD) and lowered upfront downpayment costs. 64% of Singaporeans are hoping for the government to lower BSD while 49% are requesting a reduction in the upfront downpayment cost for a home.

It is also worth noting that the majority of requests to lower BSD and upfront downpayment costs come from Millennials, at 66% (vs. middle-aged and older Singaporeans at 62%) and 54% (vs. middle-aged and older Singaporeans at 45%), respectively.

3 in 5 Millennials are prioritising saving for home buying over lifestyle amid pandemic

While 72% of Millennials are thinking of moving out of their family homes in the next year, 28% are hesitant – citing the lack of savings to own or rent a home (48%) and not being married (35%) as top barriers for being unable to do so.

Despite this, most Millennials are establishing proactive financial steps to help fulfill their homeownership dreams. The study found that 69% of Millennials are prioritising saving for home buying this year over experiences like travel, food, hobbies, and staycations.

Findings from the study further showed that the majority (97%) of Millennials would prefer to buy a home rather than rent, citing resale HDB flats as their preferred property type (30%), followed by new private non-landed homes (29%) and private non-landed resale homes (23%). Surprisingly, co-living is an unpopular housing option to them, with only 18% interested in the concept.

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