Latest Comparison of High Interest Savings Accounts in Singapore - May 2019

There have been numerous changes to the banks' interest rates in Singapore lately. As interest rates rises for loans, good news for savers who have savings in the bank as the interest we can get on our savings account is increasing as well.

However, the interest on normal savings account is still not increasing but the banks have come up with more creative ways to attract customers and offer higher interest with some small conditions. Let's take a look at which are the best high interest rates account in Singapore today?


OCBC 360

This is the bank account which I have most of my money in right now. They have revised their interest rates upwards without me not having to do any additional thing from before so those who already own this account will be happy to hear that as well.

The conditions is simple for this account. Let me summarise it:

1. Salary credit of at least $2000 to OCBC 360 and you will get 1.2% on first $35,000 and 2% on next $35,000. 
2. Spend at least $500 on OCBC credit cards and get 0.3% on first $35,000 and 0.6% on next $35,000
3. Increase account balance by at least $500 as compared to the previous month, get 0.3% on first $35,000 and 0.6% on next $35,000
4. Insure or invest with OCBC Bank and get 0.6% on first $35,000 and 1.2% on next $35,000

In summary, those who hold more than $35,000 to $70,000 in OCBC 360 account will enjoy much higher interest than before. As you can see, just by having salary credit will earn you 2% for the next $35,000 in the bank account which is quite a decent interest rate to me.

$70,000 savings in OCBC 360 account with salary credit will get you interest of $1120 per year just like that. This is close to $100 per month free money.


CIMB Fastsaver

For those who have extra cash lying around, CIMB fastsaver account is a no frails account which gives up to 1.5% interest with no conditions at all.  It was 1% previously for first $50,000 in the account but they revised it to include 1.5% for the next $25,000.

• First $50,000 - 1% p.a.
• Above S$50,000 to S$75,000 - 1.5% p.a.
• Above $75,000 - 0.6% p.a.

This is quite a good account which I am using also. No salary credit, no credit card spend or anything required at all to earn that higher interest.

Standard Chartered Bonus$aver - $100 account opening special

The next account gives pretty high interest for those who can meet its conditions. With salary credit of at least $3000 and spending of $500 per month on a SCB card linked to the bonus$aver account, you can get 1.78% interest on the first $100,000. If you can spend $2000 per month with the salary credit, then you get a very substantial total interest rate of 2.78%. 

• Salary credit of at least $3000 with monthly credit card spend of $500 - 1.78% p.a.
• Salary credit of at least $3000 with monthly credit card spend of $2000 - 2.78% p.a.

Furthermore, there is a special account opening deal of $100 cash when you open an account. You can apply for the bank account through this link to get your deal. This deal is in partnership with Singsaver. 

You can pair this savings account with the SCB unlimited card to get additional unlimited 1.5% cashback on all eligible spends. You can apply for the card here and get $100 cash + up to S$120 cashback from SCB. 

DBS Multiplier Account

The last account worth mentioning is the DBS multiplier account. Previously, they only give higher interest for the first $50,000 in the bank account but this has been revised to $100,000. However, there are certain conditions and it may be a little complicated for those who are new to this account.

Getting higher interest on the first $50,000 is easy as we just have to have our salary credited and have another category such as credit card spend. This will earn us at least 1.55% on the first $50,000 only. For the next $50,000 to earn higher interest, we'll have to have our salary credited plus additional 3 or more categories such as credit card spend, home loan installment, investment or insurance. You can get a minimum of 2% interest on $100,000 in your bank account if you meet the above salary credit + 3 or more other categories. Otherwise, in my opinion, the OCBC 360 still works better to get higher interest for the first $75,000 without having to meet so many categories.


Best Cashback Credit Card

Apart from getting higher interest on our savings in our bank accounts, we can also get cashback for our spending with cashback credit cards. I saw this promo by Singsaver on the Citi Cash Back card which they are giving out $300 NTUC, Taka or Grab codes for new customers. This is surprisingly quite a generous offer to give out $300 worth of vouchers.

Citi cashback credit card offers 8% cashback on Dining, Groceries, Petrol & Grab rides daily, worldwide with a min. spend of S$888 per statement month. You can apply for the Citi cashback card here to claim your offer or view other cashback cards available here.

The offer ends on 9 June 2019. In this battle of the cards, you can get an additional $50 if you "choose" (apply & get approved) for the winning card. You can also get a chance to win a trip to Tokyo per battle! 

All you need to do is: 

1) Apply & get approved for the winning card 

2) Click on "Submit to Win" and write why you think the card will win.

Click on the above image to find out more!

Let your money roll!

I've always try to make the best out of my money with all the deals out there. The interest which I get on a high interest bank account such as the OCBC 360 is far better than what I would get in a normal savings account. It just takes the initial setup to open the bank account and thereafter the interest will be credited to my savings account on a monthly basis. I can get more than $100 in interest per month just like that.

Pairing the high interest savings account with cash back credit cards is a smart way to make our money work harder for us. Hope this article helped you in searching for the best savings account and cashback credit cards out there with the deals you can get at this moment.

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The Rising Property Market And Interest Rates

Most of us would know that housing prices is rising again in Singapore. The sales of new private homes are also going up where we see more and more people getting interested to buy properties now. This seems to be the right time to purchase a property at the right price and also when loans are still cheap.

The following chart shows the SRX non-landed private property index from January 1995 to December 2017. We see a dip in the property market after the high in February 2013. The lowest price recorded was in December 2014 and November 2016. At current prices, it has almost reached the high back in February in 2013. It seems like the property market may breakthrough that level and continue to go higher soon. This explains why many people are entering the private property market now hoping that prices will continue to go higher.

For HDB, it is a totally different picture. Resale prices of HDB seems to be continuing on a downtrend after falling from the high in March 2013. The regulations for HDB flats such as the 5 years minimum occupation period, the limitation of loans to 30% of your gross monthly salary, the maximum loan tenure of 25 years as compared to 30 years for private properties and the restrictions of not being able to rent out your HDB flat even if you purchase a private property makes it hard for the prices to go up.

This is in line with the government's push for affordable public housing in Singapore. I don't see HDB as an investment at all because the main use of it is still for personal accommodation. However, I do foresee that private home prices should continue to go up moving forward with better economic outlook.

For those who already own a property

On the other side, many people would have already bought a property previously. If you've bought your private property at a high back in 2013, the good news is that prices are going above that soon. For HDB, its a different story.

With better economic outlook and rising property prices, interest rates are rising as well. If your housing loan is still currently on a floating rate package, its time to take a look at it before it creeps up. The SIBOR, which is the Singapore Interbank Offer Rate is the most commonly used benchmark for housing loans in Singapore. The 3M SIBOR now stands at 1.42% and the 12M SIBOR is at 1.66% as at 5th January 2018. You can refer to the official SIBOR rates here. The 3M SIBOR has increased more than 0.5% from the previous low.

Interest rates will surely go higher from here. There is no doubt about that. Its just a matter of time interest rates will increase. With the US Federal Reserve hinting on more rate hikes and stock markets across the globe rising to record levels, interest rates should not be remaining low forever.

How Much Your Loan Instalments will Rise? 

If you have a $300,000 loan, a 1% increase in interest rates will result in your monthly instalment increasing by close to $150/month. That is additional $1800/year. For a $500,000 loan, an increase in interest rates of 2% will result in your monthly instalment increasing by about $500/month. This is $6000/year. The higher your loan amount, the greater the impact it will be.

Don't forget that the norm for interest rates were about 3%-3.5% in the past. We should always be prepared for this to happen.


Refinance Your Home Loans to Lessen the Impact now

Fortunately, before the rates rise even higher, we can always refinance our home loans to lessen the impact at least for the next few years. I have worked with banks in Singapore for many years now and always on the lookout for the best loan packages for everyone.

It is recommended to go for fixed rates now and the best I can get is as below:

For both HDB and private property (Min loan amount $200,000)

2 years fixed rate

Year 1: 1.65% (Fixed)
Year 2: 1.65% (Fixed)
Year 3: SIBOR + 0.70%
Thereafter: SIBOR + 1.00%

3 years fixed rate

Year 1: 1.85% (Fixed)
Year 2: 1.85% (Fixed)
Year 3: 1.85% (Fixed)
Thereafter: SIBOR + 1.00%

For the above 2 packages, you can get cash rebate and shopping vouchers as below:

Isetan Shopping Vouchers

* Shopping vouchers applicable for both new purchase and refinancing


Cash rebate

*Cash rebate for refinancing only


If you're interested, you can email me directly at sgyounginvestment@gmail.com

I'm not sure when this fixed rate package will be revised as many banks have already adjusted their fixed rate package upwards in the last few weeks. This is the last one which still has attractive rates.

For those looking to buy a HDB flat or a private property, now is a good time to look at it. If you need assistance in your property purchase such as knowing your loan eligibility or not sure what's the process, you can email me as well. Any other questions you have, I'll try to help as much as possible too.

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Should We Pay Down Our Mortgage As Soon As Possible?

Most of us will dislike debt. It takes money from us every single month. For our home mortgage, it can be thousands of dollars a month which can be quite a significant sum of money. If mortgage is such a pain, should we use the extra savings we have to pay it down faster? Let's explore it in this article.

In Singapore, we can use either cash or CPF in our OA to pay for mortgage. The cost on a mortgage is on the interest. Like credit card which charges an interest if we didn't pay on time, likewise mortgage loans charges an interest because it is a loan in nature.

Credit: https://pixabay.com/en/photos/debt/

Interest payment can be in 6 figures

Most mortgages will start with around $250,000-$300,000 if you buy a 4 room HDB flat. The interest rate if you take up a HDB loan is 2.6% for 25 years. Did you know for a $300,000 loan at 2.6%, the total interest you would have paid is $108,181.66? If we can shorten the loan to 15 years, the total interest paid would have decreased to $62,594.59. This would immediately save us more than $40,000.

Should we use our cash to pay down our mortgage?

Using cash to pay down our mortgage may be a good choice. Right now, the money in most of our savings account do not earn more than 2.6% interest which is the interest of the HDB loan. Paying it down and reducing the loan tenure will save us more money. As mentioned earlier, it can be as much as $40,000 savings just by reducing the loan tenure by 10 years on a $300,000 mortgage. However, paying down cash means we have lesser cash flow for emergency or anything which you need the money for. It is always important to plan in advance before using cash to pay down our mortgage especially when its a huge sum of money. 

There are various ways to save on the interest we pay on our mortgage. We can reduce the loan tenure which means paying more per month for our mortgage or we can pay lump sum every year to reduce our mortgage amount. We can also refinance to a better package which is lower than 2.6% or any lower interest rates. Many banks actually offer loan packages which are less than 2% now. 

A lack of understanding of how interest rate works will make us poorer. Compound interest works its magic while amortisation on housing loans means interest paid is lesser than what is shown. For other loans such as car loans or credit card debt, the wisest decision is to pay it off or even better don't take any of such loans or owe the credit card company any money. Car loans are not amortised and is different from housing loans so the interest paid is always much more than housing loans. Credit card interest is even more scarier as it compounds at a very high rate. Have you made the right decision today?

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Comparing The Best Savings Accounts For Higher Interest Rate In Singapore

Its time to get higher interest rates for our bank accounts now. Interest rates on bank accounts have been very low the past few years at an average of 0.15%. But, all these will change soon as in the past few months, many banks have started to offer good interest rates on selected savings account. This is in line with what the US is doing, increasing interest rates slowly and steadily.
So, which are the bank accounts that will give us higher interest at the moment? I've looked through a few banks and shortlisted 2 banks which have the most attractive rates:

Best Savings Account

CIMB 

CIMB savings account lets you earn up to 1% without any spending required. They have 2 good savings account namely CIMB fast saver account and CIMB StarSaver account.

For CIMB fast saver account, you just need to maintain a minimum balance of $1000 in the account and you can earn 1% on the first $50,000 and 0.6% on any amounts above $50,000. No other conditions required.

For CIMB StarSaver account, you just need to maintain an incremental deposit of S$100 or more monthly to enjoy an interest rate of 0.8% p.a. on the entire account balance.



OCBC

OCBC has the highest and most attractive interest rates so far. The OCBC 360 account lets you earn up to 3.25% on the first $60,000 in your account. Just by crediting your salary of at least $2000 and you get 1.2%. Pay any 3 bills and you get additional 0.5%. Spend at least $500 on your credit card and another 0.5% is given to you. Its easy to get more than 2% interest through the OCBC 360 account.

Furthermore, with their credit cards which has attractive rebates such as the OCBC 365 credit card which gives us up to 6% cashback on dining, 3% cashback on all online spendings, groceries and telecommunication bills and up to 18.3% on petrol, we can enjoy even greater savings on our daily necessities.

Bank Of China

Lastly, we have the BOC smart saver. This savings account is added in due to the suggestions of readers who brought my attention to it. You can earn up to 3.55% interest on this account.

1. Bonus Interest


You can earn bonus interest in the following ways:

• Earn 0.80% p.a. when you spend at least S$500 across your BOC Credit Cards and/or Debit Cards and 1.6% when you spend more than $1500
• Earn 0.80% p.a. when your company credits your salary of at least S$2,000 or 1.2% with salary crediting of more than $6000 into your BOC MCS Account.
• Earn 0.35% p.a. when you transact 3 bill payments from your BOC MCS Account.
• Enjoy 0.60% p.a. Extra bonus interest when you have fulfilled at least one of the requirements for either Card Spend, Salary Crediting or Payment bonus interest.

This is on top of the prevailing interest which you earn


For me, I have a special corporate account under Standard Chartered Bank which gives 1.4% on any amount in that account. That account is good enough for me as of now. It really makes a difference as I can get much more interest on a monthly basis. Its much better than leaving my money in an account which only gives 0.15%. For $50,000, the interest is $700 per year on 1.4% but on 0.15%, the interest is only $75. This extra few hundred dollars is enough to go on a short holiday trip or offset some of our expenses.

Being smarter with our money is not too difficult. Try one of the accounts above and take the first step to make money work harder for you.

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9.5% Interest On Savings Account? Good Or Bad For Us Now?

POSB which was known as Post Office Savings Bank in the past has the highest interest ever recorded at 9.5% on 1 August, 1981. How many of us were there during that time to remember this historical high interest rate era? For me, I was not born yet but history shows me how interest rates have moved from the past to now. With such high interest, I can only imagine how fast my money would compound and grow over time. But, do you know that with this kind of high interest, it is actually not that good for us also?

Will Higher Interest Rates Be Good Or Bad For Us?

One thing we would be interested to know is if high interest rate is good or bad for us? If we were living in the 1970s-1980s, higher interest rates may not be that bad for us in Singapore as most people do not have huge loans back then. Fast forward to now, most people have huge housing loans coupled with car loans and also student loans.

In the past, we could get a decent 4 room HDB flat for a family of 4 at just ~$50,000. If we take a loan for this $50,000 at an interest of 3% for 25 years, the total interest we would have paid is about $21,000. Now, to get a 4 room HDB flat would cost about $350,000 and more if in a mature estate. Let's suppose we take a $350,000 loan at 3% for 25 years, how much would be the total interest paid? The answer: ~$147,000.

I do not know if you think that $147,000 is a significant sum of money? To me, it does sound quite significant. If interest rates increase, it will have a much bigger impact to us in Singapore where a large proportion of the population has at least one housing loan.

On the other hand, high interest is good for people who have a lot of savings in the bank. In the 1980s, this announcement by POSB was common:

Announcement * POSB Has Raised Its Interest Rates On Savings * 7% p.a. On Deposits Up To $100,000 * 5%p.a. On Deposits In Excess Of $100,000 * All Interest Earned Is Tax Exempt.
Post Office Savings Bank, 1980s

7% interest on the first $100,000 is quite a lot of interest. You get $7000 for $100,000 of savings per year. From 1974 to 1986, interest n deposits was mostly above 5%. If you had a lot of savings back then, these 12 years would have been very good for you. Your money would have doubled without any work.


How interest rates affect our investments and life?

Stocks

A rise in interest rates is a cost to businesses that have a lot of debt. Having to pay more for their debt will result in lower profits. This is something we need to take into consideration when we invest. On the other hand, businesses that lend money out such as banks will benefit from the rise in interest rates.

Bonds

A rise in interest rates will cause prices of bonds to drop. Bond prices and yield are inversely related. Those who have bond funds in their portfolio should watch this space carefully as it is expected that bond prices will drop as interest rates goes up.

Bank Deposits

How about those of us who have savings in the bank? Yes increase in interest rates may mean that we will get higher interest in our savings with the bank but do take note it may be a slow progress as banks will not increase deposit rates fast. It is a cost to them and with banks in Singapore still cash rich, there is no apparent reason for them to increase it fast to attract more customers.


I have plotted out the comparison between SIBOR and the average bank's fixed deposit rate from the data by MAS. The SIBOR is a good benchmark for housing loan rates as most housing loans are on the SIBOR rate. The bank's fixed deposit rate is the interest we get if we put into the 12 month's fixed deposit. Recently, there are also housing loan package based on the fixed deposit rate which I will explain more in this post.

Click Image to Enlarge

Interest rates have fallen over the decade from 1987. It is still near zero currently. Some countries even have negative interest rates where they charge a fee if we put our money in the bank. This doesn't sound right does it?

I do not have the data of the SIBOR from 2013 to 2016 plotted on the chart but from records, the 3M SIBOR is at the 1% range now. Most banks have a spread of about 1% on the loan package so this means those who are on SIBOR loan packages are paying about 2% or more interest now.

The rise in SIBOR will affect most people in Singapore. Then the question is, how much can the SIBOR move? Let's take a look back in 2004.

Sibor started moving up in 2004, rising to above 1 per cent. It rose to a peak of 3.5625 per cent in the middle of 2006. There were 17 Fed fund hike increases by the Fed from June 2004 to June 2006, hitting 5.25 per cent in June 2006. The Sibor is closely correlated to the US Fed funds rate, so any expectations of a hike there would move interest rates here higher.

From 2007 to 2014, the Sibor begun its 7 year fall. It rose again recently in 2015 and is expected to rise further on expectations the Fed fund rates will rise again. The federal reserve in the US raised interest rates just recently and is expected to raise interest at least another 2 times this year. The next rate hike may be as early as June in a few weeks time.


Watch Out For Your Home Loan Instalments

Over the past few months, many people have emailed me and said that they receive letters from the bank informing them that their home loan instalment has increased. What can they do about it?

The easiest way is to refinance and find a lower interest rate package. The best is we should go for fixed rates at least for the next 2-3 years. The last interest rate spike was from 2004 to 2006 which lasted for 2 years only. If we see from historical trends from the previous chart I plotted out, most of the spikes in interest rates lasted only about 2-3 years.

However, the problem with fixed rates is that it is higher than variable rates which may not be as attractive. The alternative to fixed rates is to go for a variable rate package pegged to the fixed deposit rate. Not all banks offer this option though. It is interesting to note that when SIBOR spiked from 2004 to 2006, fixed deposit rates remained mostly unchanged.

We cannot guarantee that fixed deposit rates will be unchanged in the next round of interest rates rise so if you are considering to go for a fixed deposit mortgage loan, it is better to go for a no lock in package. This means you can still switch out anytime in the event if the rate really increases.

Now, the issue is with so many banks in Singapore to choose from, which is the one that offers the best loan package and if you go to the bank, the staff from the bank will definitely say his or her's is the best one.

I've come out a solution for all readers of my blog. I will personally advise you if you are interested to get the best loan package regardless if its for a new property you're going to purchase or for your existing property which you want to refinance. I have the rates of all the banks in Singapore and will help you compare for the best housing loan package for your individual needs. Select one of your enquires below to fill in a contact form and I'll get back to you shortly:

• Refinance Enquires
• New Home Enquires
• Other Enquires

Is the increase in interest rate affecting you in a good or bad way? We can be prepared for this and even take advantage of it. Rates are near zero now and the only way for it to go is up. 

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Refinancing Your Housing Loan To Fixed Rates When Interest Rates Are Rising

Interest rates are rising and is still rising. Back in 2013, I started to write about the possibility of a rise in interest rates which will hurt people who are over-leveraged on debt. That was a time when interest rates were at a very low level due to QE from the US. When they started to reduce and then stop the QE, interest rates started to rise.


Home Loans Rates will be affected immediately

The rise in interest rate will affect most of us who have home loans with the banks currently. The effect is felt almost immediately with many banks starting to revise their home loan packages one by one. No longer will we see home loan interest rates of less than 2% soon. Previously, many people switched from HDB loan to bank loan to take advantage of the low interest rates which was only 1%+. With their CPF OA giving interest at 2.5% and them paying less than 2% for their mortgages, many would have benefited from switching.

However, did you know the average historical interest rates is about 3.5%? The rates will be going in that direction and probably will reach 3.5% very soon. This is also a rate set by MAS when calculating the total debt servicing ratio (TDSR). Our central bank wants to ensure people are still able to service their loans even when interest rates rise to 3.5% which is the average historical rate we should be looking at too.


The rise in SIBOR and bank's board rate

The SIBOR and board rate are 2 of the most common variable loan packages in Singapore. If you're not sure which loan package you are on, chances are you are also on the SIBOR or board rate packages. This is because if you do not refinance your housing loans, your loan package will automatically be changed back to the variable rate package even if you are on fixed rate previously.

Recently, UOB and Maybank separately announced to their customers that they will be increasing their board rate. Maybank announced that their board rate will increase by 0.25% effective 18 February 2016 and UOB announced their board rate will increase by 0.5% from 15 February 2016.

The 3M SIBOR has also increased from 0.25% in 2011 to 1.25% just last week. This is already a 1% increase in interest rates.


Revision of Fixed rate packages in Singapore

Fixed rate packages are not spared either. Banks in Singapore have been removing and revising their fixed rate packages in Singapore since the past few months. The revision has gone up by as much as 0.5%. Most fixed rate packages in Singapore are already at more than 2% versus the 1.68% which I saw just a few months ago.

Refinancing to fixed rate packages is the best thing to do in a rising interest rate environment. While most fixed rate packages are already above 2%, there is still have a good fixed rate package which is below 2% but this will end by 31st January 2016.

If you would like to refinance to a fixed rate package that is still below 2%, you can email me at sgyounginvestment@gmail.com. I will advise you personally on the package and also process the application for you. Here are the services I provide as a mortgage consultant in Singapore: http://sgyounginvestment.blogspot.sg/p/mortgage-consultancy.html

A point to note is if your home loan package is still under a lock in period, you can refinance now to get the good rates as long as the lock in will finish within 6 months. You will not incur any penalty charges. If you wait till the end of your lock in period, by then most of the home loan rates would have been revised upwards.


Mortgage loans are one of the largest expenses which most Singaporeans would have. If we can just save a few hundred a month by refinancing, it will definitely make us more financially well off. For a $400,000 mortgage loan with interest at 2.6%, we would be paying $10,400 in interest alone in one year only. Time to take action before its too late. The good home loan packages will be gone very soon.

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Related Posts:
1. Fixed Deposit Home Rate - The Alternative Interest Rate To SIBOR
2. Prepare To Pay Higher For Your Home Loans If You Do Nothing
3. Should Couples Buy A 5 Room HDB Flat For Their First BTO Application?

Fixed Deposit Home Rate - The Alternative Interest Rate To SIBOR

Interest rates are going up. This has been the concern for the past few months for many people. A rise in interest rates hurts borrowers and benefits savers. If you are a borrower, a rise in interest rates will really affect you. If you have existing loans such as car loans, housing loans and student loans, a rise in interest rates will mean you'll have to pay more every month to repay these loans. 

If you have existing loans especially housing loans, here is some good news for you. There are ways to mitigate this rise in interest rate and reduce the impact it has on you to the lowest. In this post, I'll show you what the industry calls Fixed Deposit Home Rate. This is an alternative rate to SIBOR which I believe is much better for home loans. If you're on a SIBOR or other variable home loan packages, read on to find out more about this new rate which will be beneficial for you to refinance to.

How Do We Know If Interest Rates Are Rising In Singapore?

The most widely used rate for interest rates here in Singapore is the SIBOR. It is called the Singapore Interbank Offer Rate, a rate which Singapore banks lend to each other. There is the 1 month SIBOR, 3 month SIBOR and the 12 month SIBOR. These rates are commonly used for housing loans when you loan from the bank on a variable rate package. 

Currently, the 3 month SIBOR is about 1.1%. The highest 3 month SIBOR was 7.75% in January 1998 and the lowest was 0.25% in September 2011. From the chart below, SIBOR can really swing quite widely. It is really possible for SIBOR to increase back to the 2-3% mark.  

When SIBOR increases by too much, those with housing loans will have to pay more for their instalments. For the past few months, I've been working closely with banks for my mortgage consultancy work. I've seen rates increase and also helped people refinance their home loans to better rates. There is an alternative rate to SIBOR which I think is a better choice for those with existing home loans. If you have existing home loans, listen to this carefully as it will definitely help you save more money in the long run.

Fixed Deposit Home Rate - The Alternative Interest Rate To SIBOR

In the past, there are only limited choices for home loans. People either choose the fixed rate packages or the floating rate packages pegged to SIBOR or the bank's board rate. For SIBOR, the rate is too volatile while the bank's board rate is not as transparent meaning the rate can change as and when the bank decides to change.

To safeguard ourselves against interest rates increase, we can choose the fixed rate packages but fixed rate packages are only available for 2 years to a maximum of 3 years currently. Thereafter, the rate will revert back to the variable package pegged to either SIBOR or bank's board rate again.

Now comes a new package called the fixed deposit home rate. This rate is pegged to a bank's fixed deposit rate where it is certainly less volatile than the SIBOR. Why the fixed deposit rate does not increase that much is because increasing this rate is a cost to the bank. Especially in Singapore where a lot of cash is parked in the fixed deposit accounts, banks have to think twice before increasing this rate.

From the past historical trend, the highest fixed deposit rate was around 0.875%-0.925% as compared to the highest rate of SIBOR at 7.75%. The fixed deposit rate can be either pegged to the 12 month, 18 month, 24 month or 36 month rate. Currently, only 2 banks in Singapore offer this home loan package which is pegged to the fixed deposit rate.

Refinancing to this rate would mean more stability for our monthly housing loan instalment and cost savings in the long run. To find out more about this rate or refinance your housing loans to this rate, you can email me at sgyounginvestment@gmail.com. I do not charge any fees for providing advice or refinancing your loans. This is a strictly complimentary service I offer to readers here.

Prepare To Pay Higher For Your Home Loans If You Do Nothing

Two days ago, there was an article on Channel News Asia that reported: "Home owners should prepare for higher mortgage rates: Analysts". In the article, it reported that analysts have said home owners should brace themselves for further increases in mortgage rates. Singapore has one of the highest percentage of home owners which means most of us also have mortgage loans. It is impossible to buy a house without a mortgage loan nowadays.


How increase in mortgage rates affect home owners? 

Those of us who have mortgage loans from the bank would already have felt the increase in the monthly instalments we pay for our housing loans if we did not refinance it to a fixed rate package. Some of us have small increases below $100 per month while others who have larger mortgage loans have bigger increases of a few hundred dollars per month. This increase is not going to stop there.

I've been working as a mortgage consultant for the past 2 months and have seen mortgage rates rise significantly. I work closely with the banks in Singapore and am always updated on new rates changes. Many people have emailed me to refinance their housing loans to fixed rate packages so they have a greater piece of mind. This is a free service I provide to all readers of my blog as I feel it really helps people to save more money and get the best rates for their loans. You can read more about the service I provide here: Home Loans (New/Refinance). One of the greatest expense we have is certainly our monthly mortgage instalment which we have to pay for average 25-30 years. Just refinancing to save a few hundred dollars per month will go a long way.

The rise in SIBOR

If you've taken a home loan from a bank and have not done any refinancing for the past 3-5 years, you will definitely be on a variable rate package which means you will be affected by the rise in mortgage rates.

SIBOR is the most common variable rate package. Some may ask what exactly is SIBOR? In its original form, it is called Singapore Interbank Offer Rate. This is a rate which Singapore banks lend to each other. You may have heard of the London Interbank Offer rate (LIBOR) which is used in the UK.

One year ago I wrote an article on "Housing loans - What to choose and what happens to your loans when interest rates goes up?". I warned of a impending interest rate increase and how it will affect home owners. The SIBOR rate was only 0.40% at that time. Now SIBOR rate is at 1.13%. This is an increase of 3 times now in just one year. DBS expects the three-month Singapore Interbank Offered Rate to rise from the current 1.13 per cent to 1.22 per cent by the end of this year, and 1.75 per cent in about a year's time.

I've managed to plot the 3 month and 1 month SIBOR rates from 1987. The data is from MAS website. Unfortunately, MAS discontinued the data from 1 January 2014 so I can only plot one more single point for the current October 2015. From previous trends, when rates rise, it does not just stop there. There is a significant spike in the rates and I believe it will continue to rise too.

How much increase in our housing loan instalment if mortgage rates rise by 1%?

To cut the long story short, most of us will be affected if we still have mortgage loans on variable rate packages. How much will be the increase in our housing loan instalment if mortgage rates rise by 1%? This will be what most of us are interested to know. 

I've calculated the values based on a remaining loan tenure of 20 years and increase of rates by 1%. as seen on the table below:

Loan Amount ($)	Monthly Increase
$300,000	$138
$500,000	$230
$800,000	$368
$1 Million	$460
$1.5 Million	$690
$2 Million	$920
$3 Million	$1,380

Do note that the increase is on a monthly basis. Fortunately, we can do something about our loans and limit the effect we have on rising mortgage rates.

How To Refinance to lower our monthly mortgage payments?

With mortgage rates increasing, it is time to look at refinancing our home loans so we get a piece of mind for it. Refinancing is simply changing your loan package to another loan package so you get savings on your mortgage instalments. 

I have seen banks revising up their rates over the past few months while doing mortgage consultancy work. I've also helped people lock in good rates for their mortgage loans through refinancing to fixed rate packages. I would not recommend anyone to take up or remain on floating/variable rate packages at the current moment. 

Refinancing is easy and I provide free consultancy service for your refinancing needs. Simply email me at sgyounginvestment@gmail.com and I'll settle your refinancing for you. I compare the rates of many different banks in Singapore to give you the best rates you can get for your home loans. Thereafter, I'll link up with the bank to provide personalised service for your refinancing. 

If you're planning to buy a property or have already bought your property and looking for home loans, I can assist you on applying for your new mortgage loans too. Feel free to take a look at the other complimentary services I provide here too: Home Loans (New/Refinance)

Its time to take some action and save some money in the process! Share this with your friends and family members who have mortgage loans too. 

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Related Posts:

1. Is It Necessary To Refinance Our Housing Loans?

2. Housing loans - What to choose and what happens to your loans when interest rates goes up?

Is It Necessary To Refinance Our Housing Loans?

Most Singaporeans who have bought their own property will have to take up housing loans in order to afford one. We may have heard about refinancing in one way or another but what exactly is it and is it necessary to refinance our housing loans? Did you know that if you refinance a 1 Million property loan regularly, you could save more than $50,000 through it? Each time of refinancing can save you at least $10,000 in interest every 3-4 years. With higher housing prices, refinancing becomes more important as it could save us a lot of money in the process.

Not many people refinance their housing loans as it seems quite troublesome. But if I tell you there's an easier way out for refinancing without having to search for the better loan packages yourself and without having to queue up at the bank, would you reconsider it? Let's look at how refinance can help us save money and how easily it can be done.

Credit: https://commons.wikimedia.org/wiki/File:Housing_and_Development_Board_flats_in_Bukit_Panjang,_Singapore_-_20130131_(multi-row_panorama).jpg

What is Refinancing?

Before we get into how refinancing can help save us money, let's understand what is refinance? Refinance is a term used to describe the change of loan terms from one bank to another. If there's a better package from another bank at lower rates, we can refinance there to get better rates for our loans.


How Bank Loans Work?

We can take up housing loans mainly from 2 places. Firstly, HDB does provide housing loans at interest of 0.1% above the CPF OA. It is currently at 2.6% interest. Secondly, we can take housing loans from banks which currently has interest rates lower than 2.6%.

In this post, I will focus on bank loans and how it works. From here, you'll be able to understand why it makes sense to refinance your housing loans on a regular basis.


Two Types of Housing Loans Packages

Fixed Rate Packages

Banks will not fix any rates for the long term. Fixed rate packages in Singapore are normally fixed for 2-5 years only. Thereafter, it will revert to floating rate again.

For example, if a bank say they have this fixed rate package at 1.80%, the rate may be fixed for 3 years and then becomes floating rate later from the 4th year onwards depending on market conditions. Refinancing before the rate reverts to floating will guarantee us fixed rates again.


Floating Rate Packages

For floating rate packages, the rate also changes after a short period of time, typically on average 3 years. Banks will always offer a discounted rate for the first 3 years then revert to a higher rate from the 4th year onwards.

For example, if a bank say they have this floating rate package at 1.5%, the rate is usually made up of a spread + 3m SIBOR, board rate or other floating scheme the bank has. The spread is normally lower at a discounted rate for the first 3 years and then revised upwards from the 4th year onwards. If we refinance before the rate reverts, we can always get the lower discounted rate.

How a typical floating rate home loan package looks like:

Year 1	Year 2	Year 3	Year 4 onwards
0.75% + 3m Sibor	0.75% + 3m Sibor	0.75% + 3m Sibor	1.25% + 3m Sibor

As we can see above, a typical loan package will have lower spread rates for the first 3 years then from 4th year onwards, the spread rates will revised upwards. Refinancing our loans before the rates revise upwards will ensure we always get the lower spread rate.

*The above is just an illustration of rates and do not represent any packages from any banks or financial institutions

How Much Do We Actually Pay In Interest?

Did you know you would have paid $330,523.23 in interest alone for a 1 Million mortgage loan over a 30 year period at 2% interest? If we just refinance it at 0.5% lower, we would have saved almost $100,000 in interest. $100,000 is quite a significant sum of money.

Maybe we don't want to look at long term but how about the instalment we pay every month? Will there be a difference if we refinance our housing loans? Yes there will be. If we have a 1 Million loan at 2.6% interest to be paid over 30 years, the monthly loan instalment is $4,004.00. If we can get a rate of 1.5%, the monthly loan instalment drops to $3,452.00. This helps us save almost $600 every month! Even for a few hundred thousand dollars loan for a HDB flat, we could still save a few hundred dollars a month just by refinancing.

Refinance With Ease And Skip the Queues

The benefits of refinancing is quite significant to help us save on the interest paid and even lower our monthly loan instalment. We could save a few hundred dollars a month and almost $100,000 over the long term. The problem why many people don't refinance is they don't know where to get the best rates or they don't have time to go to the banks to do it.

Refinancing is made easier with mortgage brokering services. Through this service, you get free advice on your home loans and get the best rates. All applications can be done without going down to the bank itself. Its a one stop service that addresses the needs of individuals or families to help them save time and money. You can now refinance your loans with ease.

One month ago, I decided to explore mortgage brokering service and offer it to everyone here after going through the necessary trainings. I like that this service is provided free of charge and at the same time I can help people get the best rates and also help them save time and money.

You can refinance your home loans with me where I can personally help you to calculate on your potential savings and recommend the best rates as I compare against 16 different banks and financial institutions in Singapore. Check out the service I provide here: http://sgyounginvestment.blogspot.sg/p/mortgage-consultancy.html

You can also email me at sgyounginvestment@gmail.com for any enquires which you might have.

Refinancing smartly can help save us a substantial sum of money.

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Related Posts:
1. Can You Afford That Million Dollar Condominium?
2. How Much Loan Can You Get For Your HDB flat?

10 Terms to Know Before Taking Out a Mortgage Loan

There is no doubt that modern Singapore is an incredible place to live in, one of the brightest and busiest centres of culture and commerce in the world.  It routinely ranks among the top 20 richest cities in the world. In 2015, however, Mercer’s survey also ranked it among the top ten most expensive cities. Practically speaking, this means if you’re considering buying a home in Singapore, there’s probably a mortgage loan you’ll need in the future.

To the layperson, trying to understand a home loan for the first time is like deciphering a foreign language. Here are the top ten terms and acronyms you’re likely to run across as you prepare to take out a loan and buy a home, and what they mean for you.

1. MAS: Monetary Authority of Singapore

If you’re a Singaporean, there’s a good chance you are already familiar with this abbreviation. The Monetary Authority of Singapore is the country’s central bank, and the centre of financial regulation. You’ll come across MAS often when reading about home loans, as they set all the rules of lending.

2. Loan-to-Value Ratio

Your loan-to-value ratio, or LTV, is one of two ratios that will help you determine how much you can afford to spend on a property. Your LTV is exactly what it says on the tin: the ratio of how much you borrow against the value of the property. In general, your LTV can’t be higher than 80 percent.

3. Mortgage Servicing Ratio

The MSR is the percentage of your total monthly income that will go to paying back your mortgage every month. In 2013, MAS capped the mortgage service ratio at 30 percent. Your LTV and MSR are the first things you’ll need to figure out before you take up a home loan. Fortunately, there are some great online tools to help you do just that. Tools such as LTV and MSR calculators will show you exactly how much you can afford to spend. Once you’ve figured out your price range, it’s time to move on to the next step: who are you borrowing from.

4. HDB Loans

The Housing Development Board manages public housing estates, and they also offer loans for first time home buyers. HDB loans have a “concessionary” interest rate, based on the current CPF rate plus 0.1%. To get a HDB loan, you must have an income below S$10,000 per month, and be a Singapore citizen. 

5. Bank Loans

The alternative to a HDB loan is to borrow from a private bank. Banks offer a wider range of options and flexibility, like floating interest loans or fixed rate loans (more on those later.) You can also refinance a HDB loan to a bank loan. But be very careful before you take this option! Once you’ve applied for a bank loan, you will no longer be eligible to go back to HDB.

6. In-Principal Approval

If you decide to take a bank loan, obtaining an IPA will be your first step. An IPA will tell you how much that bank is willing to let you borrow, and lay out your options for interest rates and repayment plans. After you pick a loan package, the bank will give you a Letter of Offer, and that will let you use your option to purchase. Of course, selecting a loan package will mean deciding between a varieties of different interest rates. 

7. Floating Rate Mortgages

A floating rate mortgage is one of the options a bank loan will offer you: your interest rate will vary with changing national or international market conditions. Floating rate mortgages come in two primary types: SIBOR and SOR.

8. SIBOR: Singapore Interbank Offered Rate

SIBOR is a reference rate that is calculated daily, based on the rate at which Singapore banks lend funds to each other. It is subject to fluctuations base on the economic conditions.

9. SOR: Singapore Swap Offer Rate

SOR is SIBOR’s international cousin. Where SIBOR uses the exchange rate within the country, SOR trades on an international platform: the predicted exchange rate between the US dollar and the Singapore dollar. SOR is much more flexible: when it’s at a low, it will be lower than a SIBOR rate…but when it peaks, it will be higher than SIBOR. After the global economic crisis in 2011, SOR has lost some popularity, but there are still banks that offer it.

10. Fixed Rate Mortgages

You can also obtain a locked in rate from a bank. Most fixed rate mortgages will lock your rate up to a period of five years only, before it defaults back to a floating rate. Because the rate is fixed, the bank is taking some risk that you’ll be paying less than the current national interest rate. This means that fixed rate mortgages are stable but come at a higher base price.

Conclusion

Don’t feel like you need to buy a new dictionary to apply for a home loan: once you get the basics down, you’ll start recognizing the same terms popping up all over the place! With a little research and tools like Property Guru, you’ll be well on your way to a new home in Singapore.

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The Top Down Approach To Investing

Many people have asked me how do they start investing? There are so many ways and so many techniques to investing that it makes a lot of people confuse. Do we look at charts? Do we use financial ratios? How do we know which companies to invest in?

I too was confused about the whole world of investing many years back. It was until I discovered what investing is really about that this confusion begin to disappear. Its like I saw the light at the end of the tunnel. In this post, I'll share with you a method of investing using the top down approach. Before we begin, let's understand what investing is really about and clear some misconceptions about the stock market once and for all. This will help you in understanding the top down approach better.


Misconceptions on Investing

Over the years, I've realised one main thing which caused the confusion for investing. It is that we do not understand investing at a deeper level. You see, most of us want to invest because we want to make a profit or grow our wealth. This is not wrong but it is not entirely correct either. Most of us end up trading the stock market which is totally different from investing.

Trading makes the stock market look like a gambling den. We look at charts and buy low sell high. Most will end up buying high and selling low. The main purpose is to make a profit and make as much money as possible. Some people even use software to give them buy and sell signals which makes the whole thing purposeless. In the case of trading, the companies we buy and sell is just a name. We just look at numbers instead of the company itself. If we take away the name of the companies and replace it with football team names, it becomes sports betting. If we take away the name of the companies and replace it with horses name, it becomes horse betting.

Don't get me wrong. I'm not saying trading is bad and there are professional traders out there who are successful in their own way. But if you're thinking about investing, then invest with the right approach and it'll be much clearer for you.


What exactly is Investing?

Investing is owning a part of a company. When a company is listed on the stock market, it becomes a public company. Investors who wish to own a part of that company may buy the shares of it through the stock exchange. When we own shares of a particular company, we are entitled to certain rights such as voting rights and we also get a portion of the income in the form of dividends. When the company grows, the value of our shares in that company increases as well. It becomes more valuable.

Credit: http://pixabay.com/en/analysis-pay-businessmen-meeting-680567/

Top Down Approach To Investing

Now, when we know that investing is owning a part of a company, we should really ask ourselves what do owners of a company really want? What do we as owners want to see for the company?

I'm sure most of us would know the answer to the above question. We want the company to make money and grow. This is the best way to get return on our money for investors like us. There are two main elements that move a stock price. One is earnings and the other is news.

Bearing in mind that what we really want for the company is to make profit, the top down approach will start making sense now. This approach takes into consideration of the whole macro economic conditions that is happening now and also would happen in the future.


How to use the Top Down approach in investing? 

The first step to the top down approach is to understand the elements of the macro economy. Some of you may have studied economics in JC or University which will be useful for this approach. If you have zero knowledge of economics, do not worry. I'll list down some elements and examples here which will be simple for you to understand. Let's start!

Currencies

Every country has their own currency except for the countries in the European Union which uses the Euro. More often than not, companies would have their business operated in a few different countries. Take for example a local company, Breadtalk. Although this company is started and headquartered in Singapore, they have branched overseas to more 15 countries including China, Philippines, Vietnam, Hong Kong, Taiwan, Cambodia, Malaysia etc.

Credit: https://www.flickr.com/photos/epsos/8463683689

As Breadtalk's main HQ is still in Singapore, they report their financials in Singapore dollars as well. When currencies of other countries weaken, it does affect the revenue and profit of Breadtalk. Companies can limit their exposure to currency risk by hedging using currency swaps.

Currencies fluctuate mainly due to monetary policy changes which shifts the demand and supply of it. For example, when US embarked on its massive quantitative easing which in essence is the printing of more money, the US dollar depreciates in value. Similarly, when Japan also embarked on its massive QE known as Abenomics, the value of the Yen depreciated as well. From these news on policy changes, we can predict quite accurately the movement of a particular country's currency and make smarter investment decisions.


Interest Rates

Interest rates drives the economy and affects a company's earnings. When a company has unsecured loans, they will be affected when interest rates rise. They will need more money to pay for the higher interest rates which in turn lower their profits.

Interest rates movement are mostly determined by the central bank of each individual country. The US central bank, called the federal reserve, often announce an increase or decrease in interest rates. Many countries practice an interest rate monetary policy including the European union and China. However, Singapore has an exchanged rate policy where our central bank strengthen or weaken the Sing dollar. Interest rates are increased when the economy is doing well and decreased when the economic situation is undesirable.


Commodities Prices

Commodities prices such as oil, sugar, gas and other raw materials affect different companies and different sectors. When the price of oil dropped recently, there were concerns that those companies in the oil & gas sector would be affected. As such, this concern sent the prices of these companies down drastically. Similarly, when the cost of raw materials such as aluminium goes up, it can affect the margins of construction companies and they will earn a lower profit.

Commodities prices are mainly affected by the supply and demand of the economy. For oil prices, it is mostly controlled by the Organization Of Petroleum Exporting Countries (OPEC). OPEC is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries. Simply said, when they pump in more oil into the economy, the prices of oil drop and when they withhold oil from the economy, the price of oil increases.


Picking Stocks using the Top Down Approach

The above 3 elements are just some of the factors that can affect our investments. When picking stocks, we can look at the general outlook of the economy and determine which companies or industries will possibly do well in the future. Remember, if the companies do well, we get good returns on our investments while if the companies perform poorly, we can lose money.

Back in 2013 when I first looked at the economic situation in Japan, I thought it might be a good time to invest in the Japanese real estate market. The whole motivation behind investing in Japan's real estate is fundamentally due to economic reasons. Japanese prime minister Shinzō Abe has launched Abenomics which is a combination of measures such as quantitative easing (QE), increased public infrastructure spending and the devaluation of the Yen. All these stimulates growth which will increase asset prices. Investing in Japanese property may be a good choice if growth does set in and bring the Japanese economy out of a decade of deflationary economy.

True enough, real estate prices has been rising in Japan over the past 2 years. Rental yields have also gone up. As a result, the dividends I received from the Reits and business trusts I invested went up as well. It has given me stable income of about 7% consistently for the past 2 years.  You can read about my investments in Japan here.

Knowing how the macro economy functions can help us narrow down the potential areas we could invest in. This is just one of the strategy in stock picking. To learn more on how to pick stocks, you can read my previous post on stock picking here.

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