More home buyers looking to fixed rate loans: Banks

More home buyers are looking to fixed rate loans, say banks, as home prices surge.

This is despite floating rate loans being quoted about 20 basis points cheaper than fixed rate loans.

The Urban Redevelopment Authority's overall private home price index surged 3.1 per cent in the first quarter of this year over the preceding quarter, based on a flash estimate released last Monday. The index is now up 4.6 per cent from a year ago.

"With the expectation of further interest rate increases in the US, we are seeing more customers opting for fixed rate packages," said United Overseas Bank head of secured loans Singapore Lim Beng Hua.

For new home loan applications, UOB's two-year fixed rate is 1.85 per cent and the three-year fixed rate is 1.95 per cent.

"Customers are more inclined towards two-year fixed rate packages," added Mr Lim.

DBS Bank is also seeing the same trend, while there is increasing interest in the longer three-year fixed package.

DBS Bank executive director of secured lending Tok Geok Peng said the three-year package, which was tweaked in January, now offers a fixed rate of 1.85 per cent in the first two years and 1.88 per cent in the third year.

Singapore interest rates have been rising in line with global rates.

The US Federal Reserve is expected to do two or three more hikes this year.

The three-month Sibor or the Singapore interbank offered rate which is the benchmark used to price home loans here, is around its January high of 1.5 per cent.

UOB head of markets strategy Heng Koon How expects the three-month Sibor to trade higher and maintains his year-end target of 1.85 per cent.

He anticipates two more rate increases by the Fed in the second half of the year, which will lift the Fed fund rates from 1.75 per cent to 2.25 per cent. - THE STRAITS TIMES