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More home owners considering refinancing loans as banks cut interest rates

Latest More home owners considering refinancing loans as banks cut interest rates

November 27, 2021 7:50 pm

With the ongoing disruptions to our daily lives and the global economy due to the coronavirus pandemic, the stock markets are down as well as the SIBOR Rates here in Singapore. Also known as Singapore Interbank Offered Rate, SIBOR is the interest rates that banks charge other banks in Singapore for lending of unsecured funds.

Let’s take a look at the SIBOR rates as of 9th June 2020 at 10am.

1 month SIBOR 0.2482%
3 months SIBOR 0.5597%
6 months SIBOR 0.7472%
12 months SIBOR 1.0291%

The 3 months sibor has dropped from 2 percent in May 2019 to the current rates as shown above. Since the 2008 Global Financial Crisis, May 2019 was the highest point that it had gone up to. Due to the fact that the US Fed Rates and the Sibor are closely related, the Sibor began dropping after the US Federal Reserve cuts its benchmark rates to almost zero in March to soften the economic impact due to the coronavirus pandemic.

So how does this affect home owners?

As most housing loans interests are based off Sibor, this has lowered the monthly repayments of many homeowners significantly.

Over the last few months, Standard Chartered Singapore, UOB and DBS said that they have received a lot more inquires on refinancing.
A Maybank spokesman said that a high percentage of its existing customers did repricing with the bank after they lowered their interest rates to between 0.25 to 0.35 per cent within the past three months.

DBS who has the biggest market share, offers several floating rate package that is pegged to their prevailing Singapore Dollar Fixed Deposit Interest Rate; and rates start from 1.60 per cent per annum.

Despite the high inquires, the banks interviewed did not reveal their refinancing application figures.

Monetary Authority of Singapore (MAS) board member Ong Ye Kung pointed out that current rates for new housing loans are between 1.4 per cent and 1.8 per cent for the first year, which are lower than the range of 1.8 per cent to 2.3 per cent last year, when he spoke in Parliament on May 26.

Mr Ong expects the housing loan interest rates to go south in a fair manner, in line with the sustained trends in banks’ cost of funding for these loans and MAS will not step in to intervene as these are determined by the market forces.

For most home owners who are paying an existing interest rate of more than 2 per cent, this seems like a pretty good deal. Some of them are even looking to refinance with a shorter loan period to save more on interest rates.

Point to note is that although rates are currently low now, this is not something that is permanent. Especially so for HDB home owners who are considering the switch from HDB loan to private bank loan. The consideration points here will be if the temporary low interest rates will outweigh the stability of a HDB loan; ie. if something bad happens.

While for the rest who are on bank loans, it’s worthwhile to reconsider refinancing. If you are keen to refinance, do email us at [email protected] we have mortgage brokers that will be able to compare the rates among the banks and give you the best available rates at no extra costs to you.