More looking to refinance home loans with lower interest rates

More people are looking to refinance their home loans in the past few months with lower interest rates, but not without difficulties.

Key benchmark interest rates have been dropping since governments around the world embarked on their rate cutting campaign a few months ago to revive the slumping economy.

As a result, the Singapore Interbank Offered Rate (SIBOR) has more than halved in the past three to four months. From as high as 2 per cent in September, the 3-month SIBOR is now below 1 per cent, at around 0.97 per cent as of Friday.

Many housing loan packages here are pegged to the SIBOR.

Spokesperson for loan consulting firm Housing Loan SG, Dennis Ng, said the rate decrease over the past few months has prompted more homeowners to look at the refinancing of their mortgages.

He said: “If they were to refinance their housing loans right now, they can save easily more than S$10,000 in interest savings. So as a result of this, we are seeing a surge in demand for refinancing, probably more than 50 per cent increase in the last three to six months.”

Some banks, including HSBC, also said they have seen considerable growth in such enquiries in the last six months.

But while there is an increase in interest, spokesman for another mortgage consultancy firm My Housing Loan, Goh Eck Hong, said many of the enquiries do not materialise into transactions.
Mr Goh said: “For the refinancing cases, we get quite a number who are actually looking to get additional equity term loans, and that is quite hard in this credit climate.

“And the second thing is of course valuations as well; valuations have actually fallen for quite a number of properties. If they refinance now, they actually have to top up cash to do so, so the clients could not afford to actually do so.”

Mortgage specialists said interest rates will likely remain low in the period ahead, as major global economies are expected to continue to lower rates to stimulate lending and growth in the current recessionary environment.

Source : Channel NewsAsia - 9 Jan 2009