Chart of the Day: Here is the the terrifying effect of cheap credit on Singapore

Leverage spiked in just a few years.

Singapore's household debt now stands at roughly 150% of household income, the second-highest in ASEAN behind Malaysia.

According to a report by BMI Research, lower-income households will undoubtedly face repercussions when global interest rates rise.

"A credit boom has undoubtedly resulted from the deeply negative real interest rate environment. It is difficult to tell exactly what impact global rate normalisation will have on the local economy, and much depends on the trajectory of the rise in US rates and on the eventual equilibrium level to which they reset. Our core view is that interbank rates in the US and Singapore will begin to rise steadily during 2015, but remaining subdued by historical standards," said the report.

Despite this threat, BMI Research said that Singapore remains among the best-placed developed markets to weather such a phenomenon.

"Although concerns such as household debt and the cost of credit prompt questions over the health of the Singaporean economy and consequently the consumer, we retain our view that the economy remains on sound footing, retaining its position as one of the region's outperformers," BMI Research said.