Some homeowners who opted for a DBS loan to finance their mortgage have been left in shock after the three major local banks, including DBS, announced yesterday (Oct 4) that the DBS loan interest rate for housing loans will be raised to a maximum of 3.85 per cent, significantly impacting the DBS loan repayment obligations of these borrowers.
UOB has claimed that more customers were now asking for repricing and refinancing than those who were a year ago, in line with market trends in a rising interest rate environment. DBS and OCBC pointed out that more customers with a DBS loan have recently sought stable mortgage rates due to changes in the DBS loan interest rate.
One 34-year-old, who just moved into his new home in April, told Channel 8 News that he opted for a bank’s two-year home loan variable rate package last September when the rate was 1.1 per cent and the fixed rate was 1.3 per cent. This decision significantly affected his DBS loan repayment.
Perhaps regretting the fact that he didn’t opt for Housing Development Board’s (HDB) housing loan, he said:
“Looking back now, I will regret it a little. In fact, we just received information from the bank yesterday, that is, from 1.1% when we first started, it has now risen to 3.3%, which is not what we expected.”
The new homeowner has decided to rent out an extra room to cope with the increased loan repayment cost, for now. He added that he will consider further actions at a later date, given economic conditions and inflation.
MoneyOwl Financial Planning’s Justin Tan advised, “It’s best to limit your monthly debt repayments to 35 per cent or less of your income, so you should be able to handle it no matter how high the interest rate is.”
He added, “If you’re cash-flow tight right now, or your income isn’t stable, then I’d recommend looking at fixed rates.”
HDB homeowners who did not opt for HDB mortgages in the first place, would not be able to do so later. Experts have advised that homeowners who want to feel at ease should seriously consider whether bank interest rates will really serve them well, since they may be lower in the short term but heftier as time goes on.
Navigating Rising Interest Rates: Guidance for Homeowners
The recent hike in home loan fixed interest rates by DBS, OCBC, and UOB has sent ripples of concern through many homeowners. For those who opted for a DBS loan, the sudden increase in the DBS loan interest rate can create a financial strain, and has significant implications for DBS loan repayment.
If you’re a homeowner affected by this interest rate rise, here are some potential strategies:
- Budgeting and Financial Planning: The first step is to reassess your budget. Understand how the higher DBS loan repayment will impact your overall finances and make necessary adjustments to accommodate this increased expense.
- Refinancing or Repricing: If the DBS loan interest rate increase makes your current loan unmanageable, you may want to explore the options of refinancing or repricing your loan. Consult your bank or a financial advisor to understand what these options could mean for you.
- Seek Financial Advice: Navigating these changes can be complex. Reach out to a financial advisor for guidance on how best to manage the DBS loan repayment under these new conditions.
It’s important to remember that while interest rate hikes can present financial challenges, they are not insurmountable with the right planning and advice. Stay informed about market trends and consider all possible avenues to manage the impact on your DBS loan repayment effectively.
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