Is It A Good Time Now To Take Up A Fixed Rate Mortgage Loan?

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Illustration of home loan concept with icons

Illustration of home loan concept with icons

It seems that the housing market in Singapore is finally seeing some light, after recent data showed that the private property index increased 0.5% in Q3, its first uptick after 15 periods of decline. This implies that the worst might be over for the Singapore residential housing market, although price increases are expected to be rather gradual.

What does this mean?

For those who have been waiting for the “bottom” before getting into the expensive housing market here, you might want to act fast. As we’ve seen in the boom years, housing price can shoot up fast, and you’ll have to wait several more years before it’s a good time to buy again. When the housing market is up, you can also expect interest rates on mortgage loans to increase as well.

Now the Federal Reserve has already started increasing rates slowly since last year, and rates are set to go up higher. While rates have definitely increased from 3 years ago, we haven’t seen an exponential increase in Sibor rates yet as 12M Sibor has pretty much maintained around 1.37% since 2016.



In the last month, some banks have also started a price war on trying to offer competitive rates on fixed-rate mortgage loans. While we’ve often encounter savvy home-buyers opting to get variable rate loans since they usually start off cheaper, an increasing number of people have started looking at fixed-rate loans now that the market is better and expectations in the near future are for rates to trend higher.

The New trend: 3-year fixed rate

Before this year, DBS was the only bank that offered a three-year fixed rate, but in the last month, UOB and BOC have joined the party. Earlier in September, both UOB and HSBC launched three-year fixed-rate home-loan packages. BOC also has a three-year fixed-rate package but with varying yearly interest rates.

UOB and HSBC have joined DBS in selling three-year fixed-rate packages of 1.68 per cent for each of the three years, capitalising on the recent drop in interest rates and doubts of further rate hikes by the US Federal Reserve.

While three-year fixed plans are rather rare, it is easier to find fixed rate home loans for two years.

Fixed or Variable?

One should know that there is no “correct” answer to whether a fixed or variable rate loan is best since it really depends on the borrower’s financial situation and objectives. Generally, we’ll suggest taking a fixed rate loan in light of further increase in interest rates in the near future, which is what is happening at the present moment.

You may also want to have a fixed rate loan so that you know exactly how much you are paying every month. This makes planning for your personal finances a lot easier.

Some people prefer variable loans because they want to take advantage of dips in interest rates, which can translate to some substantial savings compared to fixed rate loans. This means that your monthly mortgage rate will fluctuate along with the benchmark interest rates. If used in the right period, it can help the home-owner save much.

Those who are looking to sell their property in the near term may prefer variable rate loans as well since you will most likely be slapped with a prepayment penalty on a fixed rate loan.

If there comes a time where the difference between a fixed-rate loan and variable rate is negligible, it may make more sense to consider the former since you get to enjoy equally low rates and still get to lock-in the current low rates. In fact, that’s what’s happening now, which makes it the perfect time to get a fixed-rate loan if you are looking for a home loan.

How To Save More Money

If you are not a new home buyer and already has a mortgage loan a few years back, it is perhaps a good time now to take a look at your loan and compare to current rates. You may find that the rates you had previously may be less competitive to what the market is offering now. If that’s the case, it is time to look at refinancing your loan.

Refinancing your mortgage means to move from your current mortgage loan to another usually because the latter offers more attractive rates. However, before you jump into it, you should check that your current loan is no longer locked-in and that you do not have to pay any hefty charges or penalty for switching your loan.

Not sure how to choose a loan package? You can send in an enquiry here and we’ll get back to you shortly!

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