Property Fix rate or floating rate?

[stephenbishop]

2.75% is DBS's fixed rate for your choice of either 2 or 3 years. Minimum loan size is S$100,000. To be clear, that's not the lowest fixed rate offer in the market right now.

Spoke too soon? Probably will be in short order.

https://www.straitstimes.com/busine...s-hit-new-high-of-308-with-latest-move-by-uob

 

[BBCWatcher]

in this rising interest rate environment, you still want to float? go ahead loh.
1 Apr 1 month sora is 0.3
30 Jun 1 month sora is 0.9.
and we are not nearing the end.

Maybe, maybe not. Markets seem to be predicting a recession now (i.e. not a “soft landing”), and ordinarily a recession will keep interest rates in check.

SIBOR is already half dead. still can get sibor loans these days?

Meant SORA.

my view is that this is all luck. you have to reprice when the lock in ends. most would be paying higher than market rate if they dont. most repricing contracts include a lock in. you cannot just jump out of the lock in anytime your want.

You can, but a penalty applies.

paying a higher rate while hoping for the rate to go down. this is exactly what soh say. this is gambling. yes i gamble with shares, i gamble with reits, i gamble at turf club/casino. i do not gamble with the roof over my head.

Some people have no choice but to pay the higher interest rate. But if it’s gambling one way it’s gambling the other way, too. When mortgage interest rates last spiked it was (also) a gamble to accelerate repayment. People who did that were gambling that interest rates wouldn’t come down. Well, they lost that bet. Those spike rates were substantially higher than today’s rates. And some of them had to sell their houses because they lost their jobs and ended up with cash flow problems. That’s part of the gamble too.

Situations vary, of course. If for example it’s a HDB flat with 3 years left to run on the mortgage then you’ll probably want to retire the loan if/when interest rates get spicy. Assuming your overall liquidity is still in good shape after doing that. But with (for example) 15 years left to run would I immediately panic if interest rates get a little spicy? Not immediately, no.

the recent spike was short lived coz covid came. what is coming to coz interest rate to go down now?

As mentioned, markets seem to be forecasting a recession. A mild one at present. But another credit crisis would also work for these purposes. Obviously we can’t rule out these futures. They’re possible.

 

[BBCWatcher]

Spoke too soon? Probably will be in short order.

Maybe, but that’s why it always pays to shop around.

 

[dork32]

Maybe, but that’s why it always pays to shop around.

do you know that there is this thing call mortage broker? they do the shopping for you

 

[dork32]

Some people have no choice but to pay the higher interest rate. But if it’s gambling one way it’s gambling the other way, too. When mortgage interest rates last spiked it was (also) a gamble to accelerate repayment. People who did that were gambling that interest rates wouldn’t come down. Well, they lost that bet. Those spike rates were substantially higher than today’s rates. And some of them had to sell their houses because they lost their jobs and ended up with cash flow problems. That’s part of the gamble too.

yes trying to guess where the interest rate is is gambling. if i pay up and i lost the bet. at least i get to keep the home.
if i bet that the interest rate will go down and lost, i may be that destitute that you hope that i become. only that i am not that old.

 

[maumu]

https://www.straitstimes.com/busine...s-hit-new-high-of-308-with-latest-move-by-uob

omg..

i kinda regret not going for 2-year fixed when I refinanced just a couple of months back. it looks like rates will remain high at least into middle of next year before recession kicks in. oh well... need to see what Fed will be doing coming few months.

 

[dork32]

Situations vary, of course. If for example it’s a HDB flat with 3 years left to run on the mortgage then you’ll probably want to retire the loan if/when interest rates get spicy. Assuming your overall liquidity is still in good shape after doing that. But with (for example) 15 years left to run would I immediately panic if interest rates get a little spicy? Not immediately, no.

i still have 20years to go for my loan. but i have been prudent over that past so many years. i have accumulated enough to pay up my loan twice over.

if i pay up my loan,
when interest rates goes up, i lose nothing
when interest rates goes down, I win nothing.

if i dont pay up my loan,
when interest rate goes up, i lose tens of thousands
when interest rate goes down, i win tens of thousand.

which one do you think is the more risk averse choice.?

if i lock in 1.5% for 5 years,
when interest rate goes up, i win tens of thousands
when interest rate goes down, i win tens of thousands.
i would be an idiot if i dont lock in.

 

[dork32]

As mentioned, markets seem to be forecasting a recession. A mild one at present. But another credit crisis would also work for these purposes. Obviously we can’t rule out these futures. They’re possible.

recession may be coming, but putin and zelensky dont want to stop punching each other, interest rates may not come down so quickly.

 

[dork32]

omg..

i kinda regret not going for 2-year fixed when I refinanced just a couple of months back. it looks like rates will remain high at least into middle of next year before recession kicks in. oh well... need to see what Fed will be doing coming few months.

0.8% + sora? still less than 2% like what bbc said.

fed is not finished when it comes to raising interest rates.

nobody knows where the interest rates is heading, i fixed my rates some time back coz it gave me peace of mind, at least during the lock in period.

 

[maumu]

0.8% + sora? still less than 2% like what bbc said.

fed is not finished when it comes to raising interest rates.

nobody knows where the interest rates is heading, i fixed my rates some time back coz it gave me peace of mind, at least during the lock in period.

nope mine's not SORA. thought it's not wise to sign SORA with the rates going up so just sign a one-year fixed but probably should have gone for a higher % but 2-years to tide over.

you signed 5 years... very brave. but at 1.5% it's relatively 'cheap' regardless.

2023 will be quite stressful when it's time to refinance again ._."

 

[dork32]

nope mine's not SORA. thought it's not wise to sign SORA with the rates going up so just sign a one-year fixed but probably should have gone for a higher % but 2-years to tide over.

you signed 5 years... very brave. but at 1.5% it's relatively 'cheap' regardless.

2023 will be quite stressful when it's time to refinance again ._."

i signed 3 years fixed at 1.2% 1.5 years ago. that was in the middle of the covid mess. people were saying that i was crazy. covid was so bad, delta killing everyone and i fixed my rate.

i have mentioned that home loan is all luck. i really depends on when you lock in ends. you have to do something when you contract ends

i have one fren. he locked in 1.9% fixed before covid hit hard. he is due to refinance now. he missed all the low interest period.

 

[V_for_Vanilla]

in this rising interest rate environment, you still want to float? go ahead loh.

1 Apr 1 month sora is 0.3
30 Jun 1 month sora is 0.9.
and we are not nearing the end.

SIBOR is already half dead. still can get sibor loans these days?

MAS is phasing out SIBOR by end of 2024. Fixed or Floating, SORA or SIBOR, the key is still the bank spread. I have good experience with floating rates all this while. Timing and no lock-in is the key.

 

[maumu]

i signed 3 years fixed at 1.2% 1.5 years ago. that was in the middle of the covid mess. people were saying that i was crazy. covid was so bad, delta killing everyone and i fixed my rate.

i have mentioned that home loan is all luck. i really depends on when you lock in ends. you have to do something when you contract ends

i have one fren. he locked in 1.9% fixed before covid hit hard. he is due to refinance now. he missed all the low interest period.

yeah timing is everything.

i'll probably pay down more of the outstanding principal amount when I refinance again next year... at least it feels better not to be paying so much interest. imagine if at 3% it's like paying $15k interest (>$1k per month) on a $500k loan.

 

[dork32]

i'll probably pay down more of the outstanding principal amount when I refinance again next year..

exactly, tis is wat i have been saying. most risk averse sinky will do that.

bbc advise is dont pay down. the interest is going to come down soon. hold on.

 

[dork32]

MAS is phasing out SIBOR by end of 2024. Fixed or Floating, SORA or SIBOR, the key is still the bank spread. I have good experience with floating rates all this while. Timing and no lock-in is the key.

i would have made a lot more if i have floated my rate for the first year of my loan.

now my fixed rate is lower than floating. there is really no way to say which is better.

looking back 3 months ago, it would be a great decision if you have fixed it then

 

[V_for_Vanilla]

i would have made a lot more if i have floated my rate for the first year of my loan.

now my fixed rate is lower than floating. there is really no way to say which is better.

looking back 3 months ago, it would be a great decision if you have fixed it then

In terms of which is better one has to assess from a longer time frame and tenure. Being fixed comes with lock-in. Flexibility is sacrificed in exchange for peace of mind. In the long run it loses out to floating. At least that has been my experience.

 

[dork32]

In terms of which is better one has to assess from a longer time frame and tenure. Being fixed comes with lock-in. Flexibility is sacrificed in exchange for peace of mind. In the long run it loses out to floating. At least that has been my experience.

many of the floating rates have lock ins as well.
https://www.dbs.com.sg/personal/rat...ns-buyprivate-property-homeloans-rates-online
to me it is lower initial interest rates vs peace of mind. now floating in 1 + sora = 1.7%, fixed = 2.75%. i will bet your head it is going to be above 1.7% soon. will ever go above 2.75%, quite likely. on the average which will be better? no one really knows.

also i am sure that i would win having fixed my rate the last time i repriced vs floating.

i have had my loans for 24 years. i have repriced, refinanced. I was on fixed, on sibor, on board rate, on fd. I can tell you: there is no trend. the thing is for the past 19 years, it is either i win more or i win less. maybe i too stupid to see any trend

how many cycles of loans have you gone through? if it just one, then of course floating is better.

 

[V_for_Vanilla]

many of the floating rates have lock ins as well.
https://www.dbs.com.sg/personal/rat...ns-buyprivate-property-homeloans-rates-online
to me it is lower initial interest rates vs peace of mind. now floating in 1 + sora = 1.7%, fixed = 2.75%. i will bet your head it is going to be above 1.7% soon. will ever go above 2.75%, quite likely. on the average which will be better? no one really knows.

also i am sure that i would win having fixed my rate the last time i repriced vs floating.

i have had my loans for 24 years. i have repriced, refinanced. I was on fixed, on sibor, on board rate, on fd. I can tell you: there is no trend. the thing is for the past 19 years, it is either i win more or i win less. maybe i too stupid to see any trend

how many cycles of loans have you gone through? if it just one, then of course floating is better.

What are cycles of loan? If you mean outstanding mortgages I have two currently. Not that it matters. Anyway just my experience, YMMV.

 

[BBCWatcher]

yes trying to guess where the interest rate is is gambling. if i pay up and i lost the bet. at least i get to keep the home.

Some people don't get to keep the home because they have to sell it if/when they run into cash flow problems. They're more likely to run into cash flow problems when they have fewer liquid dollars. They have fewer liquid dollars when they accelerate repayment on mortgages.

if i bet that the interest rate will go down and lost, i may be that destitute that you hope that i become. only that i am not that old.

Destitute? That's very unlikely at low single digit interest rates, isn't it?

i still have 20years to go for my loan. but i have been prudent over that past so many years. i have accumulated enough to pay up my loan twice over.

if i pay up my loan,
when interest rates goes up, i lose nothing
when interest rates goes down, I win nothing.

if i dont pay up my loan,
when interest rate goes up, i lose tens of thousands
when interest rate goes down, i win tens of thousand.

Not quite. You gave a 20 year scenario. If the interest rate goes up for 2 years then comes down for 18 then the win (the 18 years) is much bigger than the spike (2 years). It's not tens v. tens as if they're even in that scenario.

which one do you think is the more risk averse choice.?

It depends on the situation, Dork32. It'd not feel great if you pay off a ~2.8% mortgage then end up with cash flow problems (because you plowed practically all you had into your mortgage) as you head into a recession with job loss. And as mortgage market rates dip back to 1.8%. For example. Not your situation presumably, but that sort of situation is a fairly popular one.

if i lock in 1.5% for 5 years,
when interest rate goes up, i win tens of thousands
when interest rate goes down, i win tens of thousands.
i would be an idiot if i dont lock in.

Yes, when that topic came up ("Should I lock at 1.4% or 1.5% for 5 years?") I thought it was a good idea and said so.

 

[dork32]

Some people don't get to keep the home because they have to sell it if/when they run into cash flow problems. They're more likely to run into cash flow problems when they have fewer liquid dollars. They have fewer liquid dollars when they accelerate repayment on mortgages.

i am talking about paying up 100% of the loan. this is not partial repayment. i dont have to worry running out of cash repaying the loan.

on the other hand, if interest rates rise so much that i cannot afford to pay, then i will be in trouble.

this is especially true if you are talking about the retirees.

Also i can remortgage my home if my rates are favourable. the conditions for this is different from home loans but rates are similar.