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Old 09-07-2020, 02:21 PM   #2474
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Join Date: Jun 2020
Posts: 29
Mortgage News Daily and Freddie Mac both report that U.S. mortgage interest rates have hit an all-time low, where "all-time" means for the long time those two organizations have been keeping records. MND says that the average 30 year fixed interest rate mortgage dipped to 2.92%. Yes, that's right: the standard U.S. mortgage has a fixed interest rate for the entire 30 year term and no prepayment penalty. Other types of mortgages are available, of course, but the 30 year fixed is quite popular.

The 2.92% rate is a reported average. Borrowers with good or excellent credit scores who shop around -- easy to do online nowadays -- might be able to do a bit better. Assuming a 2.9% nominal rate that's probably a real interest rate of about 1.7%. Not bad!

If you're a borrower in Singapore, these low U.S. interest rates are terrific news. U.S. dollar interest rates heavily influence Singapore dollar interest rates. Rates aren't perfectly correlated, but there is significant correlation. You should see some pretty compelling offers now, although I still caution that you should be wary of rates that are linked to references your lender controls. In Singapore a SIBOR-linked rate is safer, in my view.

The decision whether to take a HDB loan or a bank loan is that much more difficult when bank interest rates are lower, as they are now. I would point out that HDB loans still offer a number of advantages, including greater rate stability if we should see interest rates rise. And you can refinance a HDB loan with a bank loan, but not the other way around. So it's still an "interesting decision."

On the other hand, if you're a saver in Singapore -- putting Singapore dollars in ordinary bank accounts, fixed deposits, and various other cash-oriented vehicles -- then you've probably already noticed that interest rates are quite low. Take that as a strong hint not to hoard excessive amounts of cash, something you shouldn't be doing anyway. "Excessive" depends on your circumstances and needs.

If forced to guess -- and it's only that -- I think we'll have low interest rates for a while, through the rest of 2020 at least.

Thanks for your insights! Indeed it makes the choice between HDB and bank loan tougher! In my opinion, govt should revise the hdb loan rate lowe given the objective is to make hdb affordable for everyone. The uncertainty here is no one knows how long will this low interest rate last and will it continue to be lower than 2.6%? It will be good for people who have few lease years remainin to switch to bank loan and pay off the loan fast. May I ask is it wise to take up hdb loan first to enjoy the low downpayment and switch to bank loan next year to enjoy lower monthly loan payment? Thanks!
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