Home loans more accessible with sliding interest rates

Thu, Nov 21, 2019

SIOW LI SEN


HOMEBUYERS are being enticed by cheaper home loans as interest rates slide in line with softer economic conditions.

Banks are offering longer fixed rate loans such as fixing the interest rate for five years, as well as lower floating rate packages starting at 1.82 per cent per year to attract homebuyers, and those looking to refinance.

Those refinancing now can expect to pay an average 1.82 per cent to 1.83 per cent, said Darren Goh of mortgage broker MortgageWise.sg.

That's quite a fall from the average 2.3 per cent to 2.4 per cent charged by banks earlier this year when the key 3-month Sibor or Singapore interbank offered rate surged to a high of 2 per cent in May.

The 3-month Sibor rate is used typically as a benchmark for home loans.

Since then the benchmark rate has fallen, it was 1.76 per cent on Nov 18, a level last seen 12 months ago.

DBS Bank has revived its 5-year fixed rate home loan which is offered periodically. Last time the bank offered 5-year fixed rate loans was in 2018. Said Tok Geok Peng, DBS head of secured lending: "With the decline in the longer term market interest rate, we have begun to offer lower fixed rate mortgage loans.

"For HDB owners, we have put together a 5-year fixed rate at only 2 per cent per annum - 0.60 per cent lower than the HDB Concessionary loan rate."

The HDB Concessionary loan rate is 2.60 per cent. The 5-year fixed rate 2 per cent deal is also available for private property.

For those looking for a shorter and cheaper fixed rate package, DBS has a 1.86 per cent fixed rate for two years.

"With 80 per cent of Singapore's population residing in HDB flats, we have been focused on enhancing our POSB HDB loan proposition over the years, to provide greater value to Singaporeans," she said.

DBS has been able to offer HDB loans at interest rates below 2.60 per cent since we launched the POSB HDB Loan about six years ago, she said.

"The longest fixed rate tenor we have offered is five years, in line with the five-year minimum occupation period for HDB flats," she said.

Last month, Maybank Singapore introduced both 4-year fixed rate and 5-year fixed rate home loans. "We constantly review our home loan packages," said a Maybank spokeswoman.

In October, Maybank introduced a 4-year fixed rate home loan at 1.95 per cent for the first four years, as well as a 5-year fixed rate home loan at 2 per cent for the first five years.

"Both packages are applicable to HDB and private properties, and have been moderately popular with customers. We find that in the current market, customers generally prefer a shorter fixed rate period," she said.

The lowest priced home loans are from Standard Chartered Bank, for now. "Currently, our fixed rate mortgage packages range from 1.82 per cent to 1.89 per cent, depending on the mortgage size as well as the client's overall relationship with the bank," said a StanChart spokeswoman. "We review our fixed rates packages periodically."

With a global recession looming, Mr Goh thinks interest rates will fall further, and advises not taking on the longer fixed rate packages.

He does not recommend the 5-year fixed rate package now because interest rates are going down.

It's not good to lock down fixed for so long when the cycle turns, he said.

"The shorter the better now - if there is 1-year fixed rate take 1-year... but right now the shortest seems to be 2-year fixed, unfortunately.

"Generally we favour floating rates on Sibor now that rates are under pressure and 2020 still likely to be a volatile year with a 50 per cent chance of global recession looming within the next one to three years."

No one can say for sure, so the best policy is to remain totally nimble and not lock oneself for too long, he added.

DBS/POSB also provides complimentary insurance coverage which pays up to 3 months' of monthly instalment payments in the event that the borrower is affected by involuntary loss of employment, said Ms Tok.