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10-04-15, 23:45
http://www.straitstimes.com/archive/friday/premium/money/story/fixed-rate-home-loans-getting-more-popular-20150403
Fixed-rate home loans getting more popular
Home owners seek to lock in rates amid rise in key local benchmarks
Published on Apr 3, 2015 1:40 AM
By Rachael Boon
MORE home owners are taking up fixed rate loans in the wake of rising key benchmark local interest rates, said banks and mortgage brokers.
Speculation that the first United States rate hike in almost a decade could take place as early as June and the stronger greenback have driven up two key benchmark rates here.
The three-month Singapore Interbank Offered Rate (Sibor) and Swap Offer Rate - both are used to set mortgage rates here - are now around five-year highs.
Mr Keff Hui, a broker at Mortgage Supermart Singapore, said 85 per cent of customers over the past two months have inquired about fixed-rate loans, which lock in rates for a certain period.
Last year, only 40 per cent did so.
Mr Sean Lim, founder of FindAHomeLoan.co, said about 80 per cent of its clients are choosing fixed rates.
DBS and United Overseas Bank (UOB) added that they have seen an increase in inquiries for fixed-rate loans but did not disclose figures.
The three-month Sibor hit 1.01959 yesterday, near where it was in 2008. This is the interest rate at which banks lend to one another and is one of the market benchmarks for setting floating- or variable-rate loans.
"The jump in Sibor from 0.4 to 0.6 per cent, and subsequently to about 1 per cent now, probably triggered the sentiment of an increasing interest rate environment," said Mr Hui, adding that comments from the US Federal Reserve indicate that rates there may start to increase later this year.
A fixed-rate package is becoming popular as it allows a home owner to lock in the low rates for the next two to five years.
Mr Lim said: "For those who are or will be paying more than 1.8 per cent, you can have immediate savings on the interest payable and not worry about the fluctuation in rates for the next two to three years."
However, banks say home owners are still taking up other loan packages.
Standard Chartered Bank's Sibor-pegged MortgageOne loan, for instance, allows the interest earned on deposits to be used to offset the mortgage interest.
Ms Sandhya Devanathan, StanChart's retail products head in Singapore, said over the past two years, more than 95 per cent of its borrowers have Sibor-pegged housing loans.
"There has been an increase in the take-up for our fixed-rate package this year, but the proportion of borrowers with Sibor-pegged housing loans remains substantial at almost 90 per cent, given our unique MortgageOne feature," she added.
Mr Lim Beng Hua, secured loans head at UOB Singapore, said: "Our variable-rate packages, including Sibor-pegged loans and floating board rate loans, are still the more popular options because we still have customers who take their own interest rate views and like the flexibility of such packages."
Mr Hui of Mortgage Supermart noted that variable board rate packages have also gained popularity in recent months.
Fund manager Sandra Cheong, 35, took up a floating-rate loan a few months ago but switched to a fixed-rate package last week.
"It was (due to) the immediate jump of the Sibor around November, so I thought I would just lock it in as I didn't think the Sibor would continue to stay at this level. It can only go one way, which is up."
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Fixed-rate home loans getting more popular
Home owners seek to lock in rates amid rise in key local benchmarks
Published on Apr 3, 2015 1:40 AM
By Rachael Boon
MORE home owners are taking up fixed rate loans in the wake of rising key benchmark local interest rates, said banks and mortgage brokers.
Speculation that the first United States rate hike in almost a decade could take place as early as June and the stronger greenback have driven up two key benchmark rates here.
The three-month Singapore Interbank Offered Rate (Sibor) and Swap Offer Rate - both are used to set mortgage rates here - are now around five-year highs.
Mr Keff Hui, a broker at Mortgage Supermart Singapore, said 85 per cent of customers over the past two months have inquired about fixed-rate loans, which lock in rates for a certain period.
Last year, only 40 per cent did so.
Mr Sean Lim, founder of FindAHomeLoan.co, said about 80 per cent of its clients are choosing fixed rates.
DBS and United Overseas Bank (UOB) added that they have seen an increase in inquiries for fixed-rate loans but did not disclose figures.
The three-month Sibor hit 1.01959 yesterday, near where it was in 2008. This is the interest rate at which banks lend to one another and is one of the market benchmarks for setting floating- or variable-rate loans.
"The jump in Sibor from 0.4 to 0.6 per cent, and subsequently to about 1 per cent now, probably triggered the sentiment of an increasing interest rate environment," said Mr Hui, adding that comments from the US Federal Reserve indicate that rates there may start to increase later this year.
A fixed-rate package is becoming popular as it allows a home owner to lock in the low rates for the next two to five years.
Mr Lim said: "For those who are or will be paying more than 1.8 per cent, you can have immediate savings on the interest payable and not worry about the fluctuation in rates for the next two to three years."
However, banks say home owners are still taking up other loan packages.
Standard Chartered Bank's Sibor-pegged MortgageOne loan, for instance, allows the interest earned on deposits to be used to offset the mortgage interest.
Ms Sandhya Devanathan, StanChart's retail products head in Singapore, said over the past two years, more than 95 per cent of its borrowers have Sibor-pegged housing loans.
"There has been an increase in the take-up for our fixed-rate package this year, but the proportion of borrowers with Sibor-pegged housing loans remains substantial at almost 90 per cent, given our unique MortgageOne feature," she added.
Mr Lim Beng Hua, secured loans head at UOB Singapore, said: "Our variable-rate packages, including Sibor-pegged loans and floating board rate loans, are still the more popular options because we still have customers who take their own interest rate views and like the flexibility of such packages."
Mr Hui of Mortgage Supermart noted that variable board rate packages have also gained popularity in recent months.
Fund manager Sandra Cheong, 35, took up a floating-rate loan a few months ago but switched to a fixed-rate package last week.
"It was (due to) the immediate jump of the Sibor around November, so I thought I would just lock it in as I didn't think the Sibor would continue to stay at this level. It can only go one way, which is up."
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