Advertisement

Good time to lock-in loans, says DBS head

With mortgage interest rates in the US and Singapore expected to rise in the next one to two years, now is an opportune time for borrowers to switch from variable interest rate loans to fixed-rate loans, according to DBS CEO Piyush Gupta (pictured). But most Asian borrowers prefer floating rate loans rather than fixed-rates, he noted. "In Asia, most of us tend to be punters…Anecdotally, the easiest way to think about this – We go to the US (and) the most popular mortgage is the 30-year fixed rate. In Asia, we at DBS tried pushing two years ago a five-year fixed rate mortgage…almost no takers. So Asians don't like fixing, Asians don't like hedging.""However, given where we are in terms of our view in the world and the fact that there's likely to be a steepening bias over 12, 24 months, I would suggest it might be worthwhile to think about it."In addition, Gupta cautioned investors to be selective on where they put their money in China due to over-borrowing in that market. Currently, total borrowing in the country has risen to 214 percent of the GDP from just 170 percent in the 2000s. "It is not impossible that some small state-owned enterprises, some small regional banks go into an element of restructuring. They won't let it go bankrupt but the restructuring might mean bail-in. And I think that will be part of this restructuring of the system over the next couple of years.""So my thoughts on China are – I don't think it will fall off a cliff, but since there will be winners and losers, you'd better be very thoughtful and careful about your selection of counterparties…who you really do business with." Romesh Navaratnarajah, Senior Editor at PropertyGuru, wrote this story. To contact him about this or other stories email romesh@allproperty.com.sg Related Stories: New rules to seriously affect holders of multiple mortgages

Property craze propels S'pore debt level

Impact of new housing loan measures to be limited

More from PropertyGuru:
New rules to seriously affect holders of multiple mortgages
Property craze propels S'pore debt level
Impact of new housing loan measures to be limited
Cooling measures have discouraged multiple property purchases