More borrowers opt for fixed rate home loans

[minority]

FEARING that interest rates will soon start to rise, more Singapore borrowers are turning to fixed rate home loans.

The prospect of higher repayments has become far more pressing in recent weeks with the United States Federal Reserve's decision to begin cutting back its stimulus spending.

That paves the way for US interest rates to eventually rise, which will inevitably mean they will rise here too, as Singapore's interest rates closely follow those in the US.

A rise in short-term interest rates would hurt home loan borrowers as many are on floating rate packages that are linked to these rates.

Ms Lui Su Kian, managing director and head of deposits and secured lending at DBS Bank, told The Straits Times: "Recently, we have observed greater interest in fixed rate programmes in part due to concerns about potential hike of interest rates.

"Discerning homebuyers are also planning ahead and (have) opted for fixed rates programmes while interest rates are still low."

About 30 per cent of DBS customers opted for fixed rate packages in November compared with only 10 per cent in the same month in 2012.

The surge in numbers led the bank to offer a promotional rate of 1.88 per cent for its five-year fixed rate loan in November, which continues to receive positive customer response.

Maybank Singapore, which offers two- and three-year fixed-rate mortgages, said fixed-rate packages have been consistently popular with customers "as (this) provides them with more certainty and financial prudence".

However, other packages such as floating rate mortgages continue to be more popular among customers at other banks.

OCBC, which offers one- and two-year fixed rate home loans, has not seen more customers taking up fixed rate packages.

Ms Phang Lah Hwa, its head of consumer secured lending, added: "We will continue to offer fixed rate packages along with Singapore Interbank Offered Rate (Sibor) and variable rate packages."

ANZ offers a two-year fixed rate package at 1.65 per cent but its three-month "combo package" is the most popular.

The combo rate is an average of the Sibor and the Swap Offer Rate (SOR).

ANZ said the take-up for fixed rate packages remains low as customers want variable rate loans. The three-month combo package, for example, is about 1.3 per cent - 0.3 per cent plus a mark-up of 1 per cent - so it will still be lower than 1.65 per cent fixed rate.

An ANZ spokesman said: "By having an average of Sibor and SOR, customers enjoy the best of both worlds and it takes away the hassle of having to choose between the two rates."

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[amk]

If banks have no problem offering you fixed 5y 1.88%, you should know what rates are heading for the next 5yrs.

Btw I m always amused whenever I see this ANZ pitch on its "combo" package: what is the point of "average SIBOR and SOR" ? You either take a position or you don't. It is not even a hedge. It's "worst of": you are guaranteed to pay HIGHER than the benchmark. It's like a joke.

[proxon]

If banks have no problem offering you fixed 5y 1.88%, you should know what rates are heading for the next 5yrs.

Btw I m always amused whenever I see this ANZ pitch on its "combo" package: what is the point of "average SIBOR and SOR" ? You either take a position or you don't. It is not even a hedge. It's "worst of": you are guaranteed to pay HIGHER than the benchmark. It's like a joke.

That's a good projection.
I have often wondered about this fixed and floating thing and wasn't able to get a good feel of what to choose. Anyway, out of curiosity, I use one of the online calculators to do an estimation based on the following:
Scenario 1: Loan 30 years
Price 1 mil. Loan 800k, 1.3% floating for 1st 2 years and increase to 3% from year 3-5.
Scenario 2: Loan 30 years
Price 1mil. Loan 800k, 1.88 flat for 5 years.

Plugging in the numbers to the online calculator, I got for scenario 1, the first 5 years, principal + interest = 184230k with a balance of $701,714
For scenario 2, for the first 5 years, P+I = 174550k with a balance of $695,915

So the diff is about 10k in P+I and 5.8k in balance difference if the interest rate goes from 1.3 to 3% from 3rd year to fifth year as compared to 1.88% flat for the first 5 years.

I'm not sure if my computation is correct (chances of error and/or ignorance are very high ) and the online calculator is at http://tcalc.timevalue.com/all-finan...k=true#results

Anyone experienced in fixed versus floating can perhaps provide better guidance or is that a better online calculator to handle the various scenarios?

[proxon]

That's a good projection.
I have often wondered about this fixed and floating thing and wasn't able to get a good feel of what to choose. Anyway, out of curiosity, I use one of the online calculators to do an estimation based on the following:
Scenario 1: Loan 30 years
Price 1 mil. Loan 800k, 1.3% floating for 1st 2 years and increase to 3% from year 3-5.
Scenario 2: Loan 30 years
Price 1mil. Loan 800k, 1.88 flat for 5 years.

Plugging in the numbers to the online calculator, I got for scenario 1, the first 5 years, principal + interest = 184230k with a balance of $701,714
For scenario 2, for the first 5 years, P+I = 174550k with a balance of $695,915

So the diff is about 10k in P+I and 5.8k in balance difference if the interest rate goes from 1.3 to 3% from 3rd year to fifth year as compared to 1.88% flat for the first 5 years.

I'm not sure if my computation is correct (chances of error and/or ignorance are very high ) and the online calculator is at http://tcalc.timevalue.com/all-finan...k=true#results

Anyone experienced in fixed versus floating can perhaps provide better guidance or is that a better online calculator to handle the various scenarios?

Typo. Should be

Plugging in the numbers to the online calculator, I got for scenario 1, the first 5 years, principal + interest = 184230 with a balance of $701,714
For scenario 2, for the first 5 years, P+I = 174550 with a balance of $695,915

[newbie11]

Maybe this tool can help u

http://findahomeloan.sg/what-if-home-loan-calculator

[DC33_2008]

It is certainly not worthwhile for those with bank loan of floating interest of 1% and less to refinance with 1.88% Fixed for 5 years.

Typo. Should be

Plugging in the numbers to the online calculator, I got for scenario 1, the first 5 years, principal + interest = 184230 with a balance of $701,714
For scenario 2, for the first 5 years, P+I = 174550 with a balance of $695,915

[proxon]

Maybe this tool can help u

http://findahomeloan.sg/what-if-home-loan-calculator

Yes, thank you for the link.

[proxon]

It is certainly not worthwhile for those with bank loan of floating interest of 1% and less to refinance with 1.88% Fixed for 5 years.

Right. I was trying to get some hard numbers to see the difference.

[玉格格]

got use meh? even fixed oso constant for a few yrs nia.
if got package tat can fixed for 10 yrs can consider

[DC33_2008]

How to? DBS must make $. Low/No risk for them in the next 5 years as they have already factored in a good safety margin adn cash rich.

got use meh? even fixed oso constant for a few yrs nia.
if got package tat can fixed for 10 yrs can consider

[玉格格]

How to? DBS must make $. Low/No risk for them in the next 5 years as they have already factored in a good safety margin adn cash rich.

can oni LLST lor

so no point converting.

[relax88]

what your judgement on when interest rate would go back normal 2017 onwards?

[DC33_2008]

Bro, so many countries in the world are printing money. Besides US, look at japan, South Korea, etc.

what your judgement on when interest rate would go back normal 2017 onwards?

[reporter2]

http://www.straitstimes.com/archive/...loans-20140102

More borrowers opt for fixed rate home loans

Homebuyers concerned that interest rates will start rising soon

Published on Jan 02, 2014

By Rachael Boon


FEARING that interest rates will soon start to rise, more Singapore borrowers are turning to fixed rate home loans.

The prospect of higher repayments has become far more pressing in recent weeks with the United States Federal Reserve's decision to begin cutting back its stimulus spending.

That paves the way for US interest rates to eventually rise, which will inevitably mean they will rise here too, as Singapore's interest rates closely follow those in the US.

A rise in short-term interest rates would hurt home loan borrowers as many are on floating rate packages that are linked to these rates.

Ms Lui Su Kian, managing director and head of deposits and secured lending at DBS Bank, told The Straits Times: "Recently, we have observed greater interest in fixed rate programmes in part due to concerns about potential hike of interest rates.

"Discerning homebuyers are also planning ahead and (have) opted for fixed rates programmes while interest rates are still low."

About 30 per cent of DBS customers opted for fixed rate packages in November compared with only 10 per cent in the same month in 2012.

The surge in numbers led the bank to offer a promotional rate of 1.88 per cent for its five-year fixed rate loan in November, which continues to receive positive customer response.

Maybank Singapore, which offers two- and three-year fixed-rate mortgages, said fixed-rate packages have been consistently popular with customers "as (this) provides them with more certainty and financial prudence".

However, other packages such as floating rate mortgages continue to be more popular among customers at other banks.

OCBC, which offers one- and two-year fixed rate home loans, has not seen more customers taking up fixed rate packages.

Ms Phang Lah Hwa, its head of consumer secured lending, added: "We will continue to offer fixed rate packages along with Singapore Interbank Offered Rate (Sibor) and variable rate packages."

ANZ offers a two-year fixed rate package at 1.65 per cent but its three-month "combo package" is the most popular.

The combo rate is an average of the Sibor and the Swap Offer Rate (SOR).

ANZ said the take-up for fixed rate packages remains low as customers want variable rate loans. The three-month combo package, for example, is about 1.3 per cent - 0.3 per cent plus a mark-up of 1 per cent - so it will still be lower than 1.65 per cent fixed rate.

An ANZ spokesman said: "By having an average of Sibor and SOR, customers enjoy the best of both worlds and it takes away the hassle of having to choose between the two rates."

[email protected]