As signs from the US point to a cutback on stimulus spending, borrowers are wary about the possible corresponding increase in interest rates. In turn, they are favoring banks which offer fixed rates home loans. Those who are on a floating rate home loan package may be burnt by sudden rise and unpredicted fluctuations in interest rates.
DBS bank for example, saw a rise of borrowers opting for the fixed rate home loans from 10 to 30 per cent. And the smart move is to do it now, when the interest rates are low. Fixed rate home loans often offer a low initial interest rate that is fixed for the first two to five years, depending on the plan and the bank. Home buyers are happier accepting these packages as they feel like they have better control of their finances and are better armed in planning their future.
Floating rate packages are still around however, and there are those who lean towards these precisely because of the flexibility it provides. ANZ for example, offers a “3-month combo package” that takes its 1.3 per cent rate from an average of the Sibor and Swap Offer Rate (SOR), which still gives a lower percentage than its fixed rate package of 1.65 per cent.
As 2013 drew to a close on lower resale and private home sales transactions, will this change the packages bank offer as the number of borrowers may also be on a decrease?