There are increasing signs in Singapore's property markets that the home loans most favoured in 2015 will be fixed rates. The fundamental driving force behind this trend is this: there are strong hints coming from the USA that there will be cutbacks on stimulus spending. The knock-on effect of this speculation is that borrowers will be increasingly wary about the possibility of interest rates increasing. Those customers currently on a floating rate home loan may well find themselves suffering adversely due to the sudden interest rate rise, as well as rate fluctuations that are unpredictable.
One example would be to consider what is being offered by the DBS (formerly the Development Bank of Singapore). One of Asia's largest financial services organisations, with 250-plus branches in 16 markets, DBS has been at the forefront of investment, savings and loans for some time. It is widely respected as one of the safest banks in Asia. DBS stated they saw a rise in customers opting for fixed rate home loans by up to 30% from the previously collated 2013 figure of 10%. A spokesman stated that it was seen as a smart move for borrowers to choose this route while interest rates were low.
These particular loans are popular because they offer low interest rates in the initial stages, fixed for the first 2 to 5 years of term. Borrowers feel more comfortable with these packages because they give them greater control of their finances. This means that they are better equipped to look at the longer-term prospects for their financial arrangements.
It should be noted that floating rate packages are still available. In fact, many customers lean towards this particular type of loan because of its flexible nature. Singapore customers have many options to choose from. ANZ offer a three months ‘combo package' that takes its rate – 1.3% - from an average of the Sibor and Swap Offer Rate offered by the Association of Banks in Singapore. This gives customers and even lower percentage than the fixed-rate package of 1.65%.