We would imagine that those of you in Singapore who are tied down with mortgages to pay off may be rather antsy if you have taken on SOR or SIBOR home loan, given the uncertainties stemming from the fluctuations in the United States Federal Reserve funds rate. Yup, the US Fed funds rate has a direct impact on both SOR rates and SIBOR rates in Singapore.
Back in December 2015, the Fed raised interest rates for the first time in almost ten years, while hinting at its desire to possibly raise the interest rates gradually 4 times in 2016. Alas, in the name of global weakness and turmoil in the financial market, Fed officials are projecting 2 rate hikes down from 4 this year. On the 14th of April 2016, MAS also made a move to stop the strengthening of the Sing dollar against the US dollar, which in turn can affect the SOR rates.
Well, I'm not sure if that is necessarily good news for you since the cost of borrowing on your SOR or SIBOR-pegged mortgages are going to be affected whether you like it or not.
That uncertainty is what you'll inevitably experience when taking up a floating rate home loan.
Nevertheless, take heart that you have the option to refinance should the interest rate work against you.
If you already have the intention to refinance your home loan down the road, then it would make more sense to tap on a floating rate package that comes without a lock-in period to avoid any penalties that come with refinancing your home loan during the lock-in period.
A home loan without a lock-in period will give you lots of flexibility. You can change your package whenever you think you can get a cheaper package elsewhere.
After all, a small change in the interest rate can lead to big changes in our bank balances. It's best to keep your interest payments to a minimum as much as you conceivably can.
Want to check out home loans without a lock-in period? You can use a home loan comparison website like GET.com to compare all the loan packages in Singapore.
All you need to do is make use of GET.com's Home Loan Genius to compare all the home loan rates available in town. It takes just seconds to see rates.
In this example here where I've chosen to refinance a HDB flat with remaining loan amount of $300,000 for a 25-year loan tenure based on floating interest rates without a lock-in period, I can compare at a glance which rates are the most competitive. Easy peasy.
More On Home Loans
Those who are specifically looking to refinance can read more about the 4 things borrowers should consider when it comes to refinancing.