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> Home loan, Fixed or floating rate??

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TSIceQTurbo
post Aug 29 2007, 01:06 PM, updated 17y ago

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I wish to opt for hybrid home loan, whereby it is fixed for the 1st few years thereafter only use the floating rate. This can ensure that we know our own calculated risk and enjoy a lower rate later. The BLR life cycle is at its bottom now, so i assume it will increase soon, therefore i choose to use fixed rate 1st in order to avoid a higher interest rate. However, which bank offers the best rate?

I've searched using fiscal-wise before, however it did not show all the banks packages. Therefore, i would like to ask if anyone here knows any good packages that can recommend to me.
Pai
post Aug 29 2007, 01:33 PM

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QUOTE(IceQTurbo @ Aug 29 2007, 01:06 PM)
The BLR life cycle is at its bottom now, so i assume it will increase soon, therefore i choose to use fixed rate 1st in order to avoid a higher interest rate. However, which bank offers the best rate?
*
Feds is cutting their rates, so our BLR should follow suit very son instead of moving it up smile.gif
Quasi-Suave
post Aug 29 2007, 02:12 PM

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You have a take a view (of the interest rate direction). Personally (I have my reasons), I think the rates will be maintained in the short term (1-2 years) with the possibility of it moving slightly higher in the medium term. Therefore, I would choose a loan that is compatible with my view.

With this in mind, there are currently several types of loans to choose from, those that gives you a lower fixed interest (for example, Citibank 5.70% for first 3 years, 5.99% rest) or those that are flexi (BLR-1.5%/1.75%) such as Public Bank or OCBC. Taking Citibank and OCBC for comparison, you can see that for the first 3 years, Citi will charge you 5.70% while OCBC will charge 5.25% (that is 45 basis point differential on the full principal sum which translates to some serious savings). (These are zero entry cost packages. Rates can be further negotiated)

On the medium term (again this will depend on your view on how interest rates will move), assuming interest rates move upwards by 1% (BLR will then be 7.75%). Citi will charge you 5.99% while the OCBC loan will be 6% (7.75% - 1.75%). In this scenario, Citi will be marginally cheaper but you would have saved for the first 3 years where the OCBC loan gave you better rates (where the principal sum was larger).

Obviously, should the BLR move even higher, the OCBC loan will cost you more but you will also enjoy better rates should BLR remain stable (6.75% - 1.75% = 5%).


TSIceQTurbo
post Aug 30 2007, 12:45 PM

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tat's my main problem... coz i dunno whether BLR will move upwards or stay stable. If somebody can give me an idea how to utilise the current loan packages to minimise my risk, tat would be very nice. rclxms.gif

adrianocy
post Aug 30 2007, 10:22 PM

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any rates which lower than 6% is very good bargain edi.
yewkhuay
post Aug 31 2007, 02:33 PM

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go for fixed rate if u r worry about BLR fluctuation
Pai
post Aug 31 2007, 04:07 PM

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u will be probably better off going for 5 years fixed, thereafter BLR based loans for now.

After 5 years, you can always refinance to better packages if you want smile.gif
TSIceQTurbo
post Sep 3 2007, 08:43 AM

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QUOTE(Pai @ Aug 31 2007, 04:07 PM)
u will be probably better off going for 5 years fixed, thereafter BLR based loans for now.

After 5 years, you can always refinance to better packages if you want smile.gif
*
tat's wat i'm thinking now... however, the current market fixed rate for 5 yrs is ranging from 5.5%-5.99&%, which is quite high. If there is any package offering less than 5.5%, that would be quite nice. but i heard from my friend saying that, even if the bank is offering a fixed rate, there is a clause whereby they can revise the fixed rate if BLR went up to a certain level. Is this true? Then wat's the point of having a fixed rate?
Quasi-Suave
post Sep 3 2007, 10:19 AM

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QUOTE(IceQTurbo @ Sep 3 2007, 08:43 AM)
tat's wat i'm thinking now... however, the current market fixed rate for 5 yrs is ranging from 5.5%-5.99&%, which is quite high. If there is any package offering less than 5.5%, that would be quite nice. but i heard from my friend saying that, even if the bank is offering a fixed rate, there is a clause whereby they can revise the fixed rate if BLR went up to a certain level. Is this true? Then wat's the point of having a fixed rate?
*
dude, the market rate is determined by many factors, and it's unlikely that you get below 5.50% fixed at current market conditions. So unless the money market is so flush with liquidity, banks become super efficient (hence lowering their ECOF) and competition for business between banks (and/or insurance companies for housing loans) intensifies; rates are unlikely to become lower than present. If you want lower rates (4% and below) go work for a bank to enjoy their staff rates (4% and below).

Although I've not personally seen the construction of such terms (rates to increase if BLR increases to a certain level) they are indeed very possible to protect the bank from losses. Should KLIBOR be raised significantly, interest rates (whether fixed or not) would have to go up to avoid losses for the bank. Banking is a business, not charity. Now you know how some banks can have billions in profit.
cuebiz
post Sep 5 2007, 10:11 AM

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If you are thinking to buy the home for your own stay, then it is advisable to get a fixed rate loan since you could control it within your budget. Full tenure fixed rate loan is offer by ING, AIA insurance company and Islamic Banks.

Nobody can predict the BLR rates. If you look at history for the last 20 years, on average it is about 8% and the highest rate occur during 1998 which almost hit 12%.
TSIceQTurbo
post Sep 5 2007, 12:50 PM

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but taking a fixed rate for the whole tenure means a higher fixed rate amount will be imposed. So, i am thinking of getting a fixed rate for 5 or 10 years and floating rate after that. With this i have the opportunity to refinance my house after 5 years (lock in period), depending on the market condition.
hmchan911
post Sep 5 2007, 04:39 PM

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AIA hard to get their fixed rate la
they can tell u oh it is over quota already
cuebiz
post Sep 6 2007, 06:42 PM

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QUOTE(IceQTurbo @ Sep 5 2007, 12:50 PM)
but taking a fixed rate for the whole tenure means a higher fixed rate amount will be imposed. So, i am thinking of getting a fixed rate for 5 or 10 years and floating rate after that. With this i have the opportunity to refinance my house after 5 years (lock in period), depending on the market condition.
*
At the moment, fixed rate offer by insurance company is the lowest you ever seen in malaysia history. We will never know what is the BLR rate in 5 years time. If it is high, even if you refinance, i doubt it can give you the fixed rate now they are offering now.

 

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