Amid doom-laden reports over the last few months that Singapore is heading toward some sort of credit crisis, officials have scoffed at the idea and say that the economy is well and truly under control.
That’s the view of the Monetary Authority of Singapore (MAS), who says that there’s no sign of a credit bubble that’s putting our banking system at risk.
According to reports in the Straits Times, the fears came as a result of a report in US financial publication Forbes, which claimed that household debt is soaring on the island as a result of low interest rates. Forbes claims that rising property prices is leading to many people going into debt ad they invest in property or try to buy homes out of their price range.
MAS scoffed at the Forbes analysis, saying that while interest rates are at historic lows around the globe, the controlled nature of the Singapore economy means that the regulator – MAS themselves – is always on hand to ensure that things don’t get out of hand. The regulator’s statement was short and to the point, and laid the blame on financial journalists seeing things that weren’t there: “Serious observers and investors are not in doubt about the country’s financial health.”
A credit bubble – were it to happen here – would mean that banks might be forced to increase their interest rates. For the average Singapore householder, this could be bad news in several respects. Firstly, unless they’ve locked in mortgage or loan payments onto a fixed-term deal, they may well see their payments increase sharply.
Second, we may see it harder to secure new finance, with tightened criteria and higher lending rates. Credit card holders who don’t pay off their entire balance at the end of the month will probably be the hardest hit, with interest charges on immediate personal debt taking a hike.
However, we’ve seen in the past that MAS is always quick off the mark to tackle weaknesses in the national economy, and they’ll continue to act as our financial policeman.
There may be talk of a credit crisis, but we don’t expect one any time soon.
Article by Jason Taylor – [email protected]