What happened?
A few friends have been asking whether they should take up a fixed or floating mortgage rate for their home loan.
This comes after the
3-month compounded Sora crossed 3% for the first time since 2007 earlier this week.
Banks have also been raising their fixed rate loans to up to 4.5%.
Since housing loan repayments could represent a significant portion of a household’s monthly expenses, we decided to assess if it might make more sense to take a fixed or floating rate mortgage now.
Should we take a fixed or floating rate loan?
#1 – Fixed rate loan now at 4.25% a year and above
Let’s start by looking at some of the fixed rate packages in the market.
It seems like both DBS and UOB are offering fixed rate packages of 4.25% for various tenors.
For illustration purpose, we will use the UOB two-year fixed rate package of 4.25% a year.
Using an illustrative example of a S$1 million loan to be repaid over 25 years...