As we start off a brand new year let me wish all my clients and readers who follow this blog a blessed year ahead and wish you every success in all your investments in 2015! The most valuable wealth of course is health and I wish you overflowing amounts of that and remember to thank God and count our blessings.
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Towards the end of last year we witnessed a sudden plunge in oil prices from over USD100 to a little under USD60 now, which prompted us here at MortgageWise to start predicting a stronger than expected recovery in US back in Nov 2014. This would in turn lead to interest rates rising earlier than expected likely sometime in Q2. We are still keeping this view and we think 2015 will be a good year where we see growth in US driving external demand (GDP grew 5% which is strongest ever in Q3 last year) which will lead to recovery in Eurozone, Japan and even helping China sluggish output in recent months. How much will rate goes up to in 2015? As an indication US Fed has forecasted that the Federal Funds Rate will reach 1.1% by end of 2015.
The overarching theme for 2015, as far as mortgage planning and property investment is concerned, will undoubtedly be that of consolidation and getting ready for rate hikes. To this end, we will be sharing more insights as the year progresses but at the start now we like to highlight the following :
(A) Lock-In Fixed Rates At Historical Low Levels Now – Last Chance
Yes this could be your last chance to lock-in the cheapest home loan ever in a 3 year fixed rate package at an average of only 1.42% p.a. Most of the banks have already revised their fixed rate up in the last quarter of 2014. Maybank is the only one left with rates unchanged at such low levels which will be a thing of the past soon once global economy picks up steam. They will pull the plug on this very soon and you need to act fast.
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In fact we are expecting all the mortgage banks to review their packages and launch new pricing for 2015 very shortly one after another in January. And no prize for guessing which way interest rates will move. The market has already factored in impending rate hikes this year with 3-month sibor rising by almost 50 basis points to 0.45 in the span of 3 months, and sor has fluctuated widely with the strengthening USD.
(B) Take Stock – Know Your TDSR
We notice that most people still have a vague idea of Total Debt Servicing Ratio (even though it was rolled out some 1½ years ago), what are the implications and how do you compute this ratio. So we have actually come out with a simple TDSR Calculator on Excel Spreadsheet for all our clients. Just drop us a request on this website and we will gladly email it to you.
The TDSR calculator is a very useful tool as you can easily punch in all your personal income and debt information without revealing them to anyone. It gives you an indication of your actual TDSR ratio and the bank will use the same methodology in assessing your application. And you can keep the information in soft copy and update it regularly for your next home loan refinancing without punching in all the information again on some online calculator.
(C) Two More Years to Refinance Investment Property
We started talking about this “grace period” last year when we advised clients with more than 3-4 properties to take a serious look at their real estate portfolios and they may want to sell down one or two investment units in order to bring their TDSR within the stipulated 60% ratio.
The grace period given by MAS ends 30 Jun 2017 after which borrowers who still do not meet TDSR will not be allowed to refinance their mortgages, except for the property which they live in. Some may need to move into such units in order to get exemption from TDSR.
Sign up to our newsletters to receive blurps on interest rate movements and analysis for better mortgage planning. Speak to our experienced mortgage brokers today who can assist you with the right roadmap and decision for refinancing of your existing Singapore home loans.