Two numbers released in late May reshaped the affordability maths for Singapore borrowers. Core inflation eased to 1.4 per cent, and the Ministry of Manpower reported that real wages grew 4 per cent in 2025. Together they mean most households can service more debt today than they could a year ago. The question is how long that holds.
Why real wages matter more than the rate
Mortgage affordability is set by two things: how much a bank can lend you, and how much that loan costs. The first is governed by your income and the Total Debt Servicing Ratio (TDSR), the rule that caps your total monthly debt repayments at 55 per cent of gross monthly income. For HDB flats and executive condominiums (ECs) bought from a developer, the Mortgage Servicing Ratio (MSR) adds a tighter 30 per cent cap on housing debt alone.
Both ratios scale with income. When real wages rise, your nominal pay typically rises too, and your borrowing headroom expands without you doing anything. The 4 per cent real-wage figure (MOM, May 2026) is the strongest in several years, and it comes precisely because inflation fell faster than nominal pay slowed.
That last point is the one to hold onto. Nominal wage growth actually slowed in 2025. Real wages grew faster only because inflation dropped further. The improvement in your purchasing power, and your debt-servicing headroom, is being driven by the inflation side of the equation, not by employers paying more.
The signals underneath are softening
The wage data carries a caution. The share of firms granting raises fell from 78.3 per cent in 2024 to 72.4 per cent in 2025 (Straits Times, May 2026), and MOM expects wage growth to stay moderate through 2026. Firms are more profitable but more cautious about passing it through to pay.
If nominal wage growth keeps slowing and inflation stops falling, the real-wage tailwind reverses. Your income stops outpacing prices, and the headroom that opened up this year quietly closes.
The July energy tariffs are the near-term risk
The more immediate concern is inflation itself. April headline inflation came in at 1.8 per cent, below expectations, and the growth forecast was revised upward. But analysts have flagged a likely third-quarter inflation spike as delayed energy tariffs take effect in July (Singapore Business Review, May 2026). Higher electricity and utility costs feed through to the broader basket within a quarter or two.
This matters for borrowers in two ways. First, household budgets tighten as bills rise, eating into the very surplus that makes a larger mortgage comfortable. Second, if inflation reaccelerates, the case for the Monetary Authority of Singapore (MAS) to keep policy loose weakens, and the downward drift in local rates that refinancers have been counting on may stall.
What to do with this
If you are buying, the current combination favours getting your loan approved while your income looks strongest against a low-inflation backdrop. TDSR and MSR are calculated on the income you document at application, so the arithmetic is most generous now, before any Q3 budget squeeze.
If you are refinancing, the logic is similar but turns on rates rather than eligibility. Eased inflation has supported softer funding costs, but the July tariff effect introduces real two-way risk into the second-half rate path. If your existing package is repricing out of a lock-in this year, it is worth running the numbers now rather than waiting for a clearer second-half picture that may not arrive.
The window is not slamming shut. But the forces that improved your position this year, falling inflation and a real-wage gain, are both showing signs of fatigue. Decisions that depend on them are better made while the numbers still favour you.
Sarah Chen
