Banks Are Starting To Change Their Home Loan Packages – Should You Be Refinancing Your Home Loan Now?

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A certain recently elected President might have caused the Asian markets to go completely bonkers for a day or so, but thankfully that same effect doesn’t usually apply that immediately when it comes to home loan interest rates, if not people would be perpetually scrambling to refinance their home loans.

That being said, there are always certain telltale signs when you know that something is up. As we’ve mentioned before, we already expect the US Fed to announce further interest rates increases in 2017, but one often-missed indicator of changes in home loan interest rates is how banks manage their home loan packages. With the 3-month SIBOR moving to 0.97% in Jan 2017, here’s an overview of what’s going on and what you should consider:

 

Where have all the home loans gone?

We’ve seen quite a few loan packages already pulled out from the market, with all the local banks having pulled out their attractive “1% for the first year, 1.45% thereafter” package already. But then again, we never expected that to stay for long anyway. The packages that are being pulled off the shelf are:

  • DBS 1.68% 3 years fixed rate
  • UOB 1.68% 2 years fixed rate

At the same time, packages such as the 1.5% or 1.6% throughout rate from UOB and DBS might get pulled from the market as well.

The thing about home loan rates is that everything is always very relative. While SIBOR might have just crossed the 0.90% mark for the first time in a couple of months, the 1-month SIBOR just in February this year was 1.12%, and the 3-month SIBOR stood at 1.25%.

At the same time in February, Fixed Deposit-linked rates started from around 1.8% and we might very well see returns to those sort of rates should the Fed increase the interest rate as expected in December. With that in mind, what are some good packages to consider right now if you are looking to either refinance or get a home loan for a new home?

 

Best Fixed Rates Now 

Given the general uncertainty in the market at least up until the end of the year, it won’t be surprising at all to see a big increase in people taking up fixed rates. In fact the two best fixed rates in the market now are with DBS and UOB (Updated Jan 2017).

UOB is now offering a 2 year fixed rate at 1.80% & & DBS  a 3 year fixed rate of 1.88%, and given what we’ve mentioned above, this is definitely an attractive package for people who are slightly more conservative about interest rates. You can find out more about this rate here.

If you’re not one for fixed rates, a good alternative would be the 1.5% 36FDPR rate offered by UOB. With no additional clauses (unlike DBS’s package that requires you to buy mortgage insurance) and a lock in period of 2 years, a 36FDPR (0.65%) + 0.85% interest rate throughout the loan tenure is a worthy alternative, especially if you consider that the highest the 36FDPR rate has gone in the past 10 years is 0.925%. You can find out more about this rate here.

We will keep this space warm in the coming weeks as we see more changes. Follow us on Facebook in the meantime to stay tuned.

 

Conclusion

When it comes to home loans, timing can be crucial, especially if you need to refinance your home loan. While it’s really anyone’s guess what might happen at a macro level, especially given that the US Fed has snooked us before by postponing the increase of interest rates, using other information such as how banks manage their loan products can give you a good indicator of where things are headed.

Refinancing your home loan doesn’t have to be a hassle at all, and if you need a bit more advice, you can always head on over to MoneySmart’s Refinancing Wizard and get some free help from Mortgage Specialists who can better provide some perspective.

Do you think home loan rates will increase drastically in the coming few months? Share your thoughts with us here.

Mark Cheng

I rant and rave a lot, but when I'm not busy doing that, I'm managing the content for MoneySmart. I love Singapore, but I also believe in helping it to improve bit by bit, and that's where MoneySmart comes in. Have some thoughts? Drop me an email at mark@moneysmart.sg.