Singapore mortgage lenders

Banks Rushing To Raise Fixed Rate Mortgages

As what we have predicted just a week ago here at this blog – that there is only a small window of 1 to 3 months to lock down fixed rate mortgages below 2% p.a.; banks are now rushing to revise their fixed rate mortgage loans in the past 2 weeks as 3-month sibor continue its unabated rise ending the week at 0.913 (as at 13 Mar)

The market has started factoring in the much anticipated “lift off” in US interest rates in June even before it happened, with US Treasuries yields rising sharply after the latest job report last week and the subsequent sell down on Wall St. All eyes will be on Janet Yellen this week in Fed’s policy meeting for March and it is widely expected they would remove the word “patient” from its statement.

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With runaway borrowing costs for the banks, one by one Singapore banks up their fixed rate mortgage packages starting with Hong Leong Finance increasing its 3-year fixed rate from (simple) average of 1.49% to 1.72% p.a. 2 weeks ago, and that will not be the end. Next followed closely by UOB which moved its 2-year fixed to a much higher 2.18% p.a. from the previous 1.55% p.a. And this past week two more banks ended their current fixed rate home loan promotions – Bank of China (1.3% p.a., 1.5% p.a.) and DBS (1.78% p.a. for 3 years). Both will be announcing their new and higher fixed rate in the coming week.

The actions are getting fast and furious especially for the foreign banks without a huge depositor base of funds to tap from. They will have more problem hedging fixed rates from interbank markets to lend out to borrowers. In short banks’ margin for fixed rate loan will be hard squeezed which is also probably why they are more resistant to offering longer term fixed rates.

CIMB and RHB will be the next two to act this coming week with the former already announced that their longest 4-year and 5-year fixed rate mortgage will end by month-end, but that means submitting the application at least a week before which is by end of this coming week (20 Mar). RHB has also announced end to their 2-year fixed rate package (1.2% p.a., 1.6% p.a.) sometime this week. So those are out who are still sitting on the sidelines watching had better act now (even if your lock-in expires around 4 months later in Aug you are still in time, call us to find out how)

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We forecast initially 1 to 3 months for all fixed rates to go above the psychological 2% p.a. mark but from what it seems, it might be earlier than later. We now expect more banks to follow suit in the following weeks and borrowers will need to respond swiftly before losing this golden opportunity to lock down fixed rates. Work with professional mortgage brokers who can give you the lowdown on rates swiftly and deliver to you accurate and objective analysis on the best home loan solution as interest rate environment turn hawkish.

We are amazed how some analysts are still forecasting 3-month sibor to reach 1% p.a. by end of this year. In our view, 3-month sibor will continue to rise quickly and reach 1% p.a. even before June and will only stabilize in the 1.2 – 1.5% p.a. range for a long protracted period before rising at a much slower rate thereafter. In a nutshell, there will be spike up before the rate of increase flattens out as markets quickly factors in the rate hike and slowly come to terms with the new rate norm. The full effects of the oil price plunge will filter through global economy and show on economic data from spring onwards.

At MortgageWise, we seek to be your mortgage solutions partner and take pride in being able to give truly independent advice sometimes asking clients to re-price and stay with their existing bank if it doesn’t make sense for them to move. We may not get to do business with you the first time round, but we will try again. We strive to be your first choice mortgage partner in Singapore when you buy your next property. Meanwhile do sign up for our newsletter on our website and stay tuned to this blog as we bring you purposeful and proprietary news summary & insights.

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