You are now reading:
Concerned about mortgage rates? Hear an expert’s advice for home owners and home buyers
Inspire the globetrotter in you with the first one-stop travel portal in Southeast Asiadesigned by a bank that inspires, helps you plan, and lets you book in one place.
Find out moreGet up to S$210 Lazada cashback vouchers and up to S$140 cash when you apply online today! T&Cs apply.
Find out moreIntroduce a friend and be rewarded with up to S$1,000* cash credit.
Find out more Meet UOB TMRW, the all-in-one banking app built around you and your needs.
Bank. Invest. Reward. Make TMRW yours.
you are in Personal Banking
You are now reading:
Concerned about mortgage rates? Hear an expert’s advice for home owners and home buyers
Home loan rates are rising, with three-year fixed rate packages offered by Singapore banks up by at least 1.6 percentage points from late last year's 1.15 per cent per annum. As interest rates are likely to continue on their upward march, what can existing home owners and aspiring home buyers do?
In this column, Mr Lim Beng Hua, UOB’s Head of Secured Loans, answers some of your key questions about rising mortgage rates. The 50-year-old expert has been in the financial sector for over 20 years. Secured loans are those that are backed by collaterals, and include mortgages.
Q. I am buying a new property this year. What are some considerations I should keep in mind when looking for a home loan?
A: For most of us, buying a home is the largest financial commitment we will make, so we need to research and plan for a property purchase accordingly.
Carefully assess how much you can afford to pay in upfront fees – including the cash outlay, stamp duties and legal fees – and your monthly mortgage. Our local interest rates are strongly influenced by global central bank policies. Since they have been rising, you should consider using a higher rate when calculating your potential monthly payments.
There are digital tools like UOB Home Solution that helps you instantly calculate the home loan amount you can afford and get a valuation on the property you are eyeing, so you do not overextend yourself.
Q. Should I choose a fixed-rate or floating-rate mortgage? Which one is better in the long run?
A: This really depends on your needs. If you prefer greater certainty on your mortgage payments to manage your cash flow, a fixed-rate package would be more appropriate. Or you can consider a floating-rate package if you are less sensitive to interest rate fluctuations.
We also offer packages where a portion of the amount is based on a fixed rate, and the rest is pegged to a floating rate like the Singapore Overnight Rate Average (Sora). This gives you the flexibility to make prepayments should interest rates stay high, while the fixed-rate portion protects you against further rate increases.
Q. I have an outstanding home loan. Is now a good time for me to refinance my loan? What else should I consider besides interest rates?
A: Take a careful look at the terms of your current loan. Use a home loan calculator to analyse how much you would be paying – not just at today’s interest rates, but under different scenarios – for your loan, compared to others in the market.
Familiarise yourself with the lock-in period of your current loan and whether there would be any clawbacks on legal fee or valuation subsidies if you refinance.
It can take some time to refinance your loan, and you would be subject to a new lock-in period and terms for any subsidies, so it wouldn’t hurt to start a conversation with your bank early.
Q. I have more savings than I need at the moment. Is it better for me to invest this money or use it to partially pay off my home loan?
A: It is always prudent to have a healthy cash buffer relative to your loan obligations. If you have excess cash, such as if you have received a bonus, the decision on whether to invest or pay off your home loan depends on many factors.
Most importantly, remember not to lose sight of your fundamental goals, such as your retirement or your child’s education. This will determine your investment time horizon, risk appetite and expected returns.
Interestingly, the high-inflation environment tends to benefit certain investment asset classes, including real assets like property and real estate investment trusts (REITs), and commodities such as gold. Bond yields have also reached attractive levels today.
If you receive a salary increment, you could consider reducing your loan tenure. This would increase your monthly mortgage payment but could reduce your overall interest costs.
It might make sense to budget more money for your investments, especially if you expect to get stronger returns than the interest rate on your loan.
Rethink Your Wealth is a fortnightly advice series where UOB experts share insights and answers to consumers’ money-related questions.
Source: The Straits Times © Singapore Press Holdings Limited. Permission required for reproduction.
This publication, which is sponsored by UOB, is reproduced by UOB with the consent of The Straits Times. All views expressed in this publication are correct at the time of publication. Before making any investment decisions, consult your own professional advisers about issues discussed herein.
This publication shall not be regarded as an offer, recommendation, solicitation or advice to buy or sell any investment or insurance product and shall not be transmitted, disclosed, copied or relied upon by any person for whatever purpose. Any description of investment or insurance products is qualified in its entirety by the terms and conditions of the investment or insurance product and if applicable, the prospectus or constituting document of the investment or insurance product. Nothing in this document constitutes accounting, legal, regulatory, tax, financial or other advice. If in doubt, you should consult your own professional advisers about issues discussed herein.
The information contained in this publication, including any data, projections and underlying assumptions, are based on certain assumptions, management forecasts and analysis of known information and reflects prevailing conditions as of the date of the article, all of which are subject to change at any time without notice. UOB makes no representation or warranty as to, neither has it independently verified, the accuracy or completeness of the information in this publication. Any opinions or predictions reflect the writer's views as at the date of this publication and are subject to change without notice. As such, UOB and its employees accept no liability for any error, inaccuracy, omission or any consequence or any loss/damage howsoever suffered by any person, arising from any reliance by any person on the views expressed or information in this publication.
01 Sep 2022 • 6 min read
01 Sep 2022 • 8 min read
22 Aug 2022 • 7 min read