Home loan rates set to fall over next year and a half

But they will drop at slower pace due to impact of proposed Trump tariffs: Experts

- Chor Khieng Yuit

Home loan rates here are expected to head lower over the coming 18 months, despite concerns that policies imposed by incoming US president Donald Trump could reignite inflation.

Inflation has been falling in the United States but an uptick after Trump returns to the White House could put the Federal Reserve on course for fewer rate cuts in 2025.

Higher US rates mean rates here will also stay elevated. However, they will still decline, but at a slower pace than initially expected, said Mr David Baey, chief executive of Mortgage Master.

Trump's pledge to cut taxes and slap tariffs on imports during his election campaign could usher in a period of inflation in the US and the global economy if the policies are enacted.

With Republicans winning control of both Houses of Congress, he will find it even easier to push through his agenda.

Mr Winson Phoon, head of fixed income research at Maybank Securities, said the market is still pricing in a "good amount" of interest rate cuts in the next 12 to 18 months, but these will be pushed back if inflation expectations rise.

The US Fed said after its Nov 8 meeting that the US elections will have no "near-term" impact on its policy decisions.

The US central bank cut interest rates by a quarter of a percentage point at that meeting, after shaving off half a percentage point in September.

Markets are looking for another quarter of a percentage point cut on Dec 18, the last meeting for 2024, to take US rates to between 4.25 per cent and 4.5 per cent.

Beyond that, the outlook for rates will be dependent on economic data and the Trump administration's policies, Mr Phoon said.

"We are mindful of the risk of inflation reacceleration, which could lead to additional upward repricing in the terminal Fed funds rate," he noted.