1 00:00:00,000 --> 00:00:02,310 Speaker 1: this is a C. N. A. Podcast 2 00:00:04,400 --> 00:00:06,890 Speaker 1: paul. Can you just give us your quick thoughts on 3 00:00:06,890 --> 00:00:11,969 Speaker 1: the following fixed versus floating rates? I 4 00:00:11,980 --> 00:00:13,370 Speaker 2: would say floating for me 5 00:00:13,380 --> 00:00:16,689 Speaker 1: H. D. V. Loan or bank loan. 6 00:00:16,700 --> 00:00:18,160 Speaker 2: HDB at this stage, 7 00:00:18,170 --> 00:00:20,029 Speaker 1: property cooling measures 8 00:00:21,650 --> 00:00:25,680 Speaker 1: Good 1% interest rate 9 00:00:25,690 --> 00:00:26,480 Speaker 2: even 10 00:00:26,480 --> 00:00:27,580 Speaker 1: better 11 00:00:28,150 --> 00:00:30,950 Speaker 1: by home now there 12 00:00:30,950 --> 00:00:31,880 Speaker 2: are opportunities. 13 00:00:31,890 --> 00:00:33,460 Speaker 1: All right thank you so much. 14 00:00:48,040 --> 00:00:51,290 Speaker 1: Thanks for joining us on money talks. I'm Sarah al Khaldi. 15 00:00:51,300 --> 00:00:54,670 Speaker 1: If you haven't locked in a housing loan or looking 16 00:00:54,670 --> 00:00:58,120 Speaker 1: to refinance your mortgage in the near future you may 17 00:00:58,120 --> 00:01:01,420 Speaker 1: be in for a shock home loan. Interest rates have 18 00:01:01,430 --> 00:01:04,750 Speaker 1: been going up steadily. What was as low as 1% 19 00:01:04,760 --> 00:01:09,250 Speaker 1: just a year ago. Can now go as much as 3.85% 20 00:01:09,260 --> 00:01:12,660 Speaker 1: on top of that. Those planning to get an H. D. B. 21 00:01:12,660 --> 00:01:15,970 Speaker 1: Loan won't be able to borrow as much as before. 22 00:01:15,980 --> 00:01:17,310 Speaker 1: So what are your 23 00:01:18,140 --> 00:01:21,339 Speaker 1: and is it still a good idea to purchase that 24 00:01:21,350 --> 00:01:24,400 Speaker 1: property you've been eyeing to break it all down and 25 00:01:24,400 --> 00:01:27,730 Speaker 1: help you with the sums as paul. We Vice president 26 00:01:27,730 --> 00:01:31,920 Speaker 1: for Property group Finance at property group group paul. Thank 27 00:01:31,920 --> 00:01:34,550 Speaker 1: you so much for joining us today. A lot to 28 00:01:34,550 --> 00:01:35,649 Speaker 1: talk about. For sure. 29 00:01:35,660 --> 00:01:37,000 Speaker 2: For sure 30 00:01:37,010 --> 00:01:42,080 Speaker 1: mortgage rates are now around 3.5%. It used to be 31 00:01:42,090 --> 00:01:43,919 Speaker 1: one plus percent. 32 00:01:44,180 --> 00:01:47,300 Speaker 1: When was the last time? It was this high 33 00:01:47,310 --> 00:01:49,790 Speaker 2: seriously a long time ago. I think it was something 34 00:01:49,790 --> 00:01:52,220 Speaker 2: like 30 years ago that it was at a high 35 00:01:52,220 --> 00:01:55,530 Speaker 2: of 13% but that was long time ago and I 36 00:01:55,530 --> 00:01:57,640 Speaker 2: never saw those rates myself. 37 00:01:57,650 --> 00:01:58,750 Speaker 1: I didn't either. 38 00:01:58,760 --> 00:02:02,130 Speaker 2: Yeah, most people don't, and that's why the interest rates 39 00:02:02,130 --> 00:02:05,110 Speaker 2: now give people a lot of discomfort, they think that 40 00:02:05,120 --> 00:02:07,830 Speaker 2: interest rates now are going to stay high forever. That's 41 00:02:07,830 --> 00:02:08,810 Speaker 2: not the case. 42 00:02:09,020 --> 00:02:12,750 Speaker 2: The reality is that interest rates would fluctuate up and down. 43 00:02:12,760 --> 00:02:16,450 Speaker 2: We've seen low interest rates for the longest time and 44 00:02:16,460 --> 00:02:19,490 Speaker 2: going to the circumstances. We look at the war, we 45 00:02:19,490 --> 00:02:22,970 Speaker 2: look at the situation with the global economy, that's what 46 00:02:22,970 --> 00:02:26,030 Speaker 2: interest rates are moving to try and manage the inflation 47 00:02:26,030 --> 00:02:28,870 Speaker 2: risk and all that. But people must remember when you 48 00:02:28,870 --> 00:02:29,870 Speaker 2: buy a home 49 00:02:30,320 --> 00:02:33,250 Speaker 2: And you take a loan alone is 25, 30 years, 50 00:02:33,260 --> 00:02:35,920 Speaker 2: that's not going to be the whole existence, that interest 51 00:02:35,919 --> 00:02:38,900 Speaker 2: rates go up and up. As in anything that will 52 00:02:38,900 --> 00:02:41,770 Speaker 2: be up and flows in terms of interest rates, interest 53 00:02:41,770 --> 00:02:45,510 Speaker 2: rates will come off. So people have to be conservative. 54 00:02:45,520 --> 00:02:48,320 Speaker 2: They need to look into their own circumstances 55 00:02:48,340 --> 00:02:52,510 Speaker 2: and decide how to best manage the risk. The trick 56 00:02:52,510 --> 00:02:56,450 Speaker 2: is not to be overly conservative, not overly aggressive. 57 00:02:56,460 --> 00:02:59,130 Speaker 1: Yeah. And so when you take a loan for 25, 58 00:02:59,130 --> 00:03:01,830 Speaker 1: 30 years, you have to be prepared for a lot 59 00:03:01,830 --> 00:03:04,980 Speaker 1: of things to happen during that period. That's right. I 60 00:03:04,980 --> 00:03:06,359 Speaker 1: know people who say 61 00:03:06,500 --> 00:03:09,040 Speaker 1: all of a sudden I have to pay a couple 62 00:03:09,040 --> 00:03:13,589 Speaker 1: $100 more every month for my mortgage and it's something 63 00:03:13,590 --> 00:03:15,930 Speaker 1: that they're not prepared to do, 64 00:03:15,940 --> 00:03:18,650 Speaker 2: Right. But the funny thing is this, when the loans 65 00:03:18,650 --> 00:03:22,400 Speaker 2: are being measured by the banks, when they evaluate whether 66 00:03:22,410 --> 00:03:26,940 Speaker 2: you qualify for stand alone, they've actually built in higher 67 00:03:26,950 --> 00:03:30,549 Speaker 2: interest amounts. So for example, right if you borrowed from 68 00:03:30,550 --> 00:03:33,110 Speaker 2: the bank and let's say the interest was 1% beginning 69 00:03:33,110 --> 00:03:33,700 Speaker 2: of the year, 70 00:03:34,139 --> 00:03:37,870 Speaker 2: Banks would have measured it at 3.5% and evaluated whether 71 00:03:37,870 --> 00:03:41,940 Speaker 2: you'll be able to stomach the higher payment amounts. So 72 00:03:41,950 --> 00:03:45,860 Speaker 2: those are stress test basically you would be able to 73 00:03:45,860 --> 00:03:48,809 Speaker 2: afford it. You would not end up having to forego 74 00:03:48,820 --> 00:03:52,790 Speaker 2: food and that. Certainly sometimes small sacrifices may need to 75 00:03:52,790 --> 00:03:53,550 Speaker 2: be made but 76 00:03:53,770 --> 00:03:58,510 Speaker 2: generally affordable. So the Singapore populace is quite well protected. 77 00:03:58,510 --> 00:03:58,910 Speaker 2: I think 78 00:03:58,920 --> 00:04:02,050 Speaker 1: I see before banks give you a loan, they have 79 00:04:02,060 --> 00:04:05,630 Speaker 1: checked how much you earn and made sure that you 80 00:04:05,630 --> 00:04:09,020 Speaker 1: can endure the rates that we are seeing right now, 81 00:04:09,030 --> 00:04:13,300 Speaker 2: Total debt servicing ratio is now packed at 55% based 82 00:04:13,300 --> 00:04:14,830 Speaker 2: on the higher interest rate, which means 83 00:04:14,850 --> 00:04:17,740 Speaker 2: There's an inbuilt buffer. You have to pay more. Yes, 84 00:04:17,750 --> 00:04:21,870 Speaker 2: but you won't suffer until you end up having to 85 00:04:21,880 --> 00:04:25,330 Speaker 2: cut your meals from 3-2. Certainly you may end up 86 00:04:25,330 --> 00:04:27,190 Speaker 2: in the short term going to les restaurants 87 00:04:27,200 --> 00:04:31,950 Speaker 1: right? Maybe the holiday is closer but it's not the 88 00:04:31,960 --> 00:04:35,910 Speaker 1: food and electricity bills kind of sacrifices 89 00:04:35,930 --> 00:04:39,450 Speaker 1: with rates that are not just rising. It's also rising 90 00:04:39,450 --> 00:04:43,050 Speaker 1: so fast and we'll talk about why in a bit 91 00:04:43,060 --> 00:04:46,920 Speaker 1: but if you haven't locked in your rates yet, you 92 00:04:46,920 --> 00:04:50,390 Speaker 1: might think that you have to just keep paying more. 93 00:04:50,400 --> 00:04:52,190 Speaker 1: Do you think that's the case, 94 00:04:52,200 --> 00:04:55,370 Speaker 2: we'll answer is yes and no firstly whether or not 95 00:04:55,380 --> 00:04:59,350 Speaker 2: one locks in the rate depends on really once appetite 96 00:04:59,350 --> 00:05:02,469 Speaker 2: for interest rates or risk a very good client of 97 00:05:02,470 --> 00:05:04,820 Speaker 2: mine in the past was a very good example. 98 00:05:05,130 --> 00:05:07,650 Speaker 2: He told me at that point in time interest rates 99 00:05:07,650 --> 00:05:12,060 Speaker 2: are lower fixed rates or something like 0.5% above floating 100 00:05:12,060 --> 00:05:15,420 Speaker 2: rate at that point in time. Everyone's thinking well I 101 00:05:15,420 --> 00:05:17,620 Speaker 2: don't think rates will be going up very much right. 102 00:05:17,630 --> 00:05:20,950 Speaker 2: But my client told me he said Paul I want 103 00:05:20,950 --> 00:05:23,779 Speaker 2: to lock in the rate. Why even though he's willing 104 00:05:23,779 --> 00:05:27,500 Speaker 2: to pay .5% more simply because of this he wants 105 00:05:27,500 --> 00:05:30,500 Speaker 2: to be able to sleep at night. Because his view 106 00:05:30,500 --> 00:05:33,570 Speaker 2: is pessimistic. He thinks that interest rates will continue going 107 00:05:33,570 --> 00:05:34,279 Speaker 2: up and up 108 00:05:34,670 --> 00:05:37,550 Speaker 2: now. Even now there are clients who believe that interest 109 00:05:37,550 --> 00:05:40,599 Speaker 2: rates will go up for the next year or so 110 00:05:40,610 --> 00:05:44,360 Speaker 2: and will reverse why Because if you look at what 111 00:05:44,370 --> 00:05:47,340 Speaker 2: the U. S. Is doing to manage interest rates, they 112 00:05:47,339 --> 00:05:50,480 Speaker 2: think that it will come under control within a year. 113 00:05:50,900 --> 00:05:53,880 Speaker 2: So a lot of them are still in very open positions. 114 00:05:53,880 --> 00:05:57,660 Speaker 2: They're doing floating rates and they say okay this increase 115 00:05:57,660 --> 00:06:01,030 Speaker 2: in interest rates is only short term right? I think 116 00:06:01,029 --> 00:06:03,290 Speaker 2: that after that when the rates go down I will 117 00:06:03,290 --> 00:06:05,809 Speaker 2: enjoy the lower rates. So there are pros and cons 118 00:06:05,810 --> 00:06:08,740 Speaker 2: to having fixed rates. If you lock yourself in, your 119 00:06:08,740 --> 00:06:13,000 Speaker 2: also looking to hire rates, rates turn around. So whatever 120 00:06:13,010 --> 00:06:15,350 Speaker 2: gives you a good night's sleep. I think that's what 121 00:06:15,350 --> 00:06:17,020 Speaker 2: is really important. So 122 00:06:17,020 --> 00:06:20,770 Speaker 1: how should people determine what the best loan is for them? 123 00:06:21,120 --> 00:06:24,240 Speaker 2: I think the best loan for a person really like 124 00:06:24,250 --> 00:06:27,330 Speaker 2: what I say, it depends on a their personal attitude 125 00:06:27,330 --> 00:06:30,920 Speaker 2: towards risk or the views of the market. Secondly, also 126 00:06:30,920 --> 00:06:35,940 Speaker 2: looks at the individual circumstances. People are so sensitive to 127 00:06:35,950 --> 00:06:36,810 Speaker 2: interest rates 128 00:06:37,070 --> 00:06:39,880 Speaker 2: that they forget that the best home loans are not 129 00:06:39,880 --> 00:06:43,280 Speaker 2: just about race, but what suits you and what suits 130 00:06:43,279 --> 00:06:43,599 Speaker 2: your 131 00:06:43,610 --> 00:06:44,500 Speaker 1: risk appetite. 132 00:06:44,510 --> 00:06:47,860 Speaker 2: So for example if let's say me and my wife 133 00:06:47,860 --> 00:06:50,940 Speaker 2: had bought this property, the plan is that after five 134 00:06:50,940 --> 00:06:54,480 Speaker 2: years I'm going to sell it right and three years 135 00:06:54,480 --> 00:06:55,390 Speaker 2: down the road 136 00:06:55,900 --> 00:06:59,469 Speaker 2: there's an opportunity for me to refinance for cheaper rates. 137 00:06:59,470 --> 00:07:03,230 Speaker 2: Would I do it and says no Why? Because usually 138 00:07:03,230 --> 00:07:06,360 Speaker 2: refinancing would lock in for a further period of time, 139 00:07:06,980 --> 00:07:10,580 Speaker 2: I wouldn't do anything because if I went to refinance 140 00:07:10,590 --> 00:07:14,110 Speaker 2: that would go against my original plan to sell my property. 141 00:07:14,110 --> 00:07:17,320 Speaker 2: Some families are like that husband and wife have decided 142 00:07:17,320 --> 00:07:20,170 Speaker 2: that after five years the husband or the wife may 143 00:07:20,170 --> 00:07:22,220 Speaker 2: stop work to look after the kids, 144 00:07:22,500 --> 00:07:24,850 Speaker 2: they want to move to a smaller property and so 145 00:07:24,850 --> 00:07:27,220 Speaker 2: and so forth. So these are the factors that come 146 00:07:27,220 --> 00:07:28,330 Speaker 2: together as well. 147 00:07:28,340 --> 00:07:31,570 Speaker 1: A lot of people now are looking at their loans 148 00:07:31,570 --> 00:07:33,910 Speaker 1: and are trying to figure out what they should do, 149 00:07:33,920 --> 00:07:39,270 Speaker 1: what should they look for in these packages that banks 150 00:07:39,270 --> 00:07:40,190 Speaker 1: are offering. 151 00:07:40,200 --> 00:07:43,910 Speaker 2: Okay, so firstly the lock in period. Now I say 152 00:07:43,910 --> 00:07:46,840 Speaker 2: lock in period because this would relate to, for example, 153 00:07:46,840 --> 00:07:48,270 Speaker 2: plans a client of mine 154 00:07:48,740 --> 00:07:52,610 Speaker 2: came back to complain why? Because after he had done 155 00:07:52,610 --> 00:07:55,920 Speaker 2: a transaction with us, somebody convinced him a year later 156 00:07:55,920 --> 00:07:59,110 Speaker 2: that there was a better package. Now his plan was 157 00:07:59,110 --> 00:08:01,960 Speaker 2: to always sell the property and what he didn't realize 158 00:08:01,960 --> 00:08:02,440 Speaker 2: was that 159 00:08:03,190 --> 00:08:05,790 Speaker 2: The new package came with a two year lock in 160 00:08:05,790 --> 00:08:07,050 Speaker 2: of actually three 161 00:08:07,580 --> 00:08:10,610 Speaker 2: And he went to sign up and when it came 162 00:08:10,610 --> 00:08:13,140 Speaker 2: time for him to diverse the property, he had to 163 00:08:13,140 --> 00:08:17,440 Speaker 2: pay a penalty of 1.5%, which kind of goes against 164 00:08:17,440 --> 00:08:19,420 Speaker 2: the grain of what he intended to do. So he 165 00:08:19,420 --> 00:08:23,440 Speaker 2: was very unhappy secondly, would be features of the product. 166 00:08:23,450 --> 00:08:25,810 Speaker 2: So for example, if you look at how the interest 167 00:08:25,810 --> 00:08:28,760 Speaker 2: rates are computed when they are computed if you're in 168 00:08:28,760 --> 00:08:31,480 Speaker 2: a fixed loan and you want to break the cost, 169 00:08:31,480 --> 00:08:33,079 Speaker 2: there's some cost to be incurred. 170 00:08:33,650 --> 00:08:37,870 Speaker 2: So things like that, how do you manage payment features 171 00:08:37,870 --> 00:08:40,359 Speaker 2: and so on so forth because a lot of terms 172 00:08:40,360 --> 00:08:43,660 Speaker 2: and conditions are bound to each product, we look at 173 00:08:43,660 --> 00:08:46,350 Speaker 2: this and say, okay, what makes sense for you, if 174 00:08:46,350 --> 00:08:49,790 Speaker 2: you plan to do a partial repayment at a particular 175 00:08:49,790 --> 00:08:51,990 Speaker 2: point in the year. But if you do it during 176 00:08:51,990 --> 00:08:55,270 Speaker 2: that can be incurred, you extra cost. These are little 177 00:08:55,270 --> 00:08:58,260 Speaker 2: things that people are not aware of until it comes 178 00:08:58,270 --> 00:09:00,230 Speaker 2: time to do it. Then they said I didn't know 179 00:09:00,230 --> 00:09:01,089 Speaker 2: this was 180 00:09:01,300 --> 00:09:02,120 Speaker 2: relevant to 181 00:09:02,120 --> 00:09:04,839 Speaker 1: me. I see. So I have to read the fine 182 00:09:04,840 --> 00:09:05,780 Speaker 1: print for sure. 183 00:09:05,790 --> 00:09:08,170 Speaker 2: Unfortunately most of the fine print is very 184 00:09:08,170 --> 00:09:08,770 Speaker 1: fine. 185 00:09:08,780 --> 00:09:10,380 Speaker 2: Yeah. 186 00:09:10,390 --> 00:09:13,700 Speaker 1: As we think about where these interest rates will go. 187 00:09:13,700 --> 00:09:17,099 Speaker 1: How high do you think mortgage rates came? 188 00:09:17,110 --> 00:09:20,949 Speaker 1: Because if we haven't seen it for this line so long, 189 00:09:20,960 --> 00:09:22,670 Speaker 1: what should we expect? 190 00:09:22,679 --> 00:09:25,010 Speaker 2: So we've taken a look at the numbers and we 191 00:09:25,010 --> 00:09:28,380 Speaker 2: are looking at something like 2.72 point 8% for three 192 00:09:28,380 --> 00:09:31,040 Speaker 2: months or so by the year end, beginning of next 193 00:09:31,040 --> 00:09:34,560 Speaker 2: year maybe about 3.5% as it is. The long term 194 00:09:34,559 --> 00:09:38,120 Speaker 2: interest rates are already almost at the 3.5 level which 195 00:09:38,120 --> 00:09:39,750 Speaker 2: is why it makes a lot of sense for the 196 00:09:39,750 --> 00:09:40,840 Speaker 2: government to then say 197 00:09:41,280 --> 00:09:45,040 Speaker 2: I'm going to place the computational rate of 4% just 198 00:09:45,040 --> 00:09:46,900 Speaker 2: so that the balance is flexible. 199 00:09:46,910 --> 00:09:51,199 Speaker 1: But what about 1% rates? Will we ever see that 200 00:09:51,210 --> 00:09:53,160 Speaker 1: again in the near future? 201 00:09:53,170 --> 00:09:55,820 Speaker 2: When you say near future? How far are you talking? 202 00:09:55,820 --> 00:09:58,679 Speaker 1: I would say 3-5 years. 203 00:09:58,690 --> 00:10:01,130 Speaker 2: Well, if only I had a crystal ball 204 00:10:01,809 --> 00:10:05,070 Speaker 2: But 1% rates at this point in time. I find 205 00:10:05,070 --> 00:10:07,950 Speaker 2: it challenging to find based on current circumstances, but things 206 00:10:07,950 --> 00:10:11,750 Speaker 2: could change depending on how the economy's go. People remember 207 00:10:11,750 --> 00:10:14,580 Speaker 2: we're seeing this global change and every day we are 208 00:10:14,580 --> 00:10:18,090 Speaker 2: hearing news that basically drives the interest rates higher rather 209 00:10:18,090 --> 00:10:18,910 Speaker 2: than lower. 210 00:10:19,140 --> 00:10:21,270 Speaker 2: So that part we have to see whether it's a 211 00:10:21,270 --> 00:10:23,980 Speaker 2: perfect storm or a perfect calm. 212 00:10:23,990 --> 00:10:27,720 Speaker 1: So we can't assume that it will go back to 213 00:10:27,720 --> 00:10:29,450 Speaker 1: that level anytime soon. 214 00:10:29,460 --> 00:10:32,020 Speaker 2: It's hard to plan. So that's why it's very important 215 00:10:32,020 --> 00:10:34,319 Speaker 2: to look at it from your point of view and 216 00:10:34,320 --> 00:10:38,410 Speaker 2: say conservatively, what would I do? What's my next best action? 217 00:10:38,420 --> 00:10:41,760 Speaker 2: What the steps they are pragmatic for me to take 218 00:10:41,770 --> 00:10:43,630 Speaker 2: and how do I do all these things? I think 219 00:10:43,630 --> 00:10:44,840 Speaker 2: it's very important to 220 00:10:45,120 --> 00:10:48,470 Speaker 2: Be very clear about what your red flags are. The 221 00:10:48,470 --> 00:10:52,000 Speaker 2: markers are areas that you cannot step up plan for 222 00:10:52,000 --> 00:10:56,120 Speaker 2: that because that's more pragmatic than saying let's plan for 1%, 223 00:10:56,120 --> 00:10:58,420 Speaker 2: which may or may not come right. So I think 224 00:10:58,429 --> 00:11:01,079 Speaker 2: we take a day by day approach with our clients. 225 00:11:01,090 --> 00:11:03,939 Speaker 1: I see it really depends on your situation. 226 00:11:03,950 --> 00:11:04,770 Speaker 2: Exactly. 227 00:11:09,370 --> 00:11:12,030 Speaker 1: Hi, my name is steve Lie and I'm Teresa Tang 228 00:11:12,250 --> 00:11:14,630 Speaker 1: and we are the hosts of the new podcast CNN 229 00:11:14,630 --> 00:11:18,220 Speaker 1: correspondent from new york to Bangkok join us as we 230 00:11:18,220 --> 00:11:21,240 Speaker 1: kick back and chat with our colleagues across the globe 231 00:11:21,250 --> 00:11:24,300 Speaker 1: about the latest news developments. Look out for our weekly 232 00:11:24,300 --> 00:11:26,560 Speaker 1: episodes wherever you get your podcasts, 233 00:11:30,570 --> 00:11:37,160 Speaker 1: what other assumptions do people have about mortgages and property 234 00:11:37,160 --> 00:11:39,910 Speaker 1: that you think should be addressed um when 235 00:11:39,910 --> 00:11:42,579 Speaker 2: people like interest rates, if you've been a market a 236 00:11:42,580 --> 00:11:46,179 Speaker 2: long time you realize people say things like that, firstly, 237 00:11:46,190 --> 00:11:49,620 Speaker 2: People generally in the past look at low interest rates 238 00:11:49,620 --> 00:11:52,610 Speaker 2: for the first 2 to 3 years. They don't care 239 00:11:52,610 --> 00:11:54,710 Speaker 2: that the fourth year goes to something that is very, 240 00:11:54,710 --> 00:11:58,380 Speaker 2: very high because when you talk to them, they say, okay, 241 00:11:58,380 --> 00:12:00,540 Speaker 2: I can refinance after three years. Right 242 00:12:00,790 --> 00:12:04,110 Speaker 2: now. There are inherent assumptions in what they're saying. So 243 00:12:04,110 --> 00:12:08,560 Speaker 2: firstly they're assuming that interest rates will remain low. Clearly 244 00:12:08,570 --> 00:12:11,730 Speaker 2: in this time you're saying that's not happening right? So 245 00:12:11,730 --> 00:12:14,500 Speaker 2: three years ago, had you gone into a loan with 246 00:12:14,510 --> 00:12:17,530 Speaker 2: something with very low first three years and then thereafter 247 00:12:17,530 --> 00:12:18,270 Speaker 2: it goes high. 248 00:12:18,980 --> 00:12:21,810 Speaker 2: You could be caught out. So the assumption is that 249 00:12:21,820 --> 00:12:25,990 Speaker 2: interest rates will remain low. Another assumption is people assume 250 00:12:25,990 --> 00:12:31,470 Speaker 2: that earning capability would remain. They assume that, Hey, maybe 251 00:12:31,470 --> 00:12:34,400 Speaker 2: today I earned 5000 a month in three years time 252 00:12:34,400 --> 00:12:38,830 Speaker 2: I'll be earning equal or 10,000 or more. They assume that, 253 00:12:38,830 --> 00:12:42,720 Speaker 2: but a lot of people don't realize that companies get downsized. 254 00:12:42,730 --> 00:12:44,690 Speaker 2: There are risks in that area. 255 00:12:45,210 --> 00:12:48,360 Speaker 2: Thirdly, is a change in personal plans. So for example, 256 00:12:48,360 --> 00:12:50,030 Speaker 2: husband and wife, let's say in the beginning, the both 257 00:12:50,030 --> 00:12:53,340 Speaker 2: of them may buy a property together, let's say $2 258 00:12:53,340 --> 00:12:56,430 Speaker 2: million dollars worth based on both their income 259 00:12:57,160 --> 00:13:00,599 Speaker 2: in three years time, the wife says, I'm going to 260 00:13:00,600 --> 00:13:04,599 Speaker 2: look after the kids, the income drops. And actually if 261 00:13:04,600 --> 00:13:07,240 Speaker 2: they want to refinance of course tds are rules allow 262 00:13:07,240 --> 00:13:10,070 Speaker 2: them to do it. But remember all of a sudden 263 00:13:10,080 --> 00:13:13,819 Speaker 2: what was affordable in the beginning then becomes not so 264 00:13:13,820 --> 00:13:16,800 Speaker 2: affordable at the end. So all these things will change 265 00:13:16,800 --> 00:13:19,800 Speaker 2: and people don't think about those assumptions that they make 266 00:13:19,809 --> 00:13:23,550 Speaker 2: because like I said, the market always talks about cheap 267 00:13:23,550 --> 00:13:26,440 Speaker 2: interest rates, not the whole thing holistically. 268 00:13:26,630 --> 00:13:31,370 Speaker 1: The government also tightened new rules around borrowing money for 269 00:13:31,370 --> 00:13:35,100 Speaker 1: property and they say it's to avoid future difficulties in 270 00:13:35,100 --> 00:13:39,140 Speaker 1: servicing loans. So this now affects of course not just 271 00:13:39,150 --> 00:13:41,550 Speaker 1: those who are trying to pay their property, but those 272 00:13:41,550 --> 00:13:45,660 Speaker 1: who are also trying to buy homes, how should property 273 00:13:45,660 --> 00:13:51,170 Speaker 1: buyers adjust their expectations and their plans as they look around. 274 00:13:51,570 --> 00:13:55,360 Speaker 2: So the first thing would be to firstly understand why 275 00:13:55,360 --> 00:13:58,210 Speaker 2: they're buying a certain property. Now a lot of clients 276 00:13:58,210 --> 00:14:00,820 Speaker 2: choose to buy since sizes, why? Because that's the max 277 00:14:00,820 --> 00:14:01,550 Speaker 2: they can go, 278 00:14:02,059 --> 00:14:04,310 Speaker 2: that's the first thing. Second thing is the aspiration, they 279 00:14:04,309 --> 00:14:06,479 Speaker 2: want to be able to move from H. D. B 280 00:14:06,480 --> 00:14:09,910 Speaker 2: to a condo in X number of years, that's their plan, 281 00:14:09,920 --> 00:14:12,189 Speaker 2: there are a lot of uncertainties now, as you can 282 00:14:12,190 --> 00:14:12,730 Speaker 2: see 283 00:14:13,260 --> 00:14:16,520 Speaker 2: In recent months, I think what makes sense is then 284 00:14:16,520 --> 00:14:19,950 Speaker 2: to say, instead of going from a to Z in 285 00:14:19,960 --> 00:14:23,760 Speaker 2: this timeframe, perhaps I could lengthen the time frame and 286 00:14:23,760 --> 00:14:28,010 Speaker 2: maybe add another step. So instead of going straight to 287 00:14:28,020 --> 00:14:30,710 Speaker 2: two million property, I could go into a $1 million 288 00:14:30,710 --> 00:14:33,520 Speaker 2: dollar property and then build in a few more years. 289 00:14:33,530 --> 00:14:35,540 Speaker 2: It is lower. Yes. But 290 00:14:36,150 --> 00:14:39,670 Speaker 2: the risks will be well thought out and there is 291 00:14:39,670 --> 00:14:42,110 Speaker 2: no stress. And on the day it doesn't make sense 292 00:14:42,110 --> 00:14:45,200 Speaker 2: to be buying a property hastily. If you're planning to 293 00:14:45,200 --> 00:14:47,910 Speaker 2: make money quickly, it doesn't make sense. If it adds 294 00:14:47,910 --> 00:14:51,650 Speaker 2: a lot of stress to your strategy, if you add 295 00:14:51,660 --> 00:14:54,720 Speaker 2: a few more years, change your strategy, it may become 296 00:14:54,720 --> 00:14:58,490 Speaker 2: more comfortable and allows you to then stop and think. 297 00:14:58,500 --> 00:15:01,590 Speaker 2: Which is something we encourage our clients to always do. 298 00:15:01,860 --> 00:15:04,710 Speaker 1: So for those who are trying to buy their first 299 00:15:04,710 --> 00:15:07,580 Speaker 1: property or buy any property really, is it better to 300 00:15:07,590 --> 00:15:09,390 Speaker 1: buy now or wait 301 00:15:09,400 --> 00:15:10,990 Speaker 2: $64 million dollar 302 00:15:11,000 --> 00:15:11,730 Speaker 1: question. 303 00:15:12,570 --> 00:15:15,850 Speaker 2: There is always a good opportunity to buy at any 304 00:15:15,850 --> 00:15:18,200 Speaker 2: point in the market, even when the market was up 305 00:15:18,200 --> 00:15:21,670 Speaker 2: and rising and so forth. This is the most frequent 306 00:15:21,670 --> 00:15:24,650 Speaker 2: question I get from people. Is this the best time 307 00:15:24,650 --> 00:15:27,950 Speaker 2: to buy? The answer is yes. Why? Because there are 308 00:15:27,960 --> 00:15:31,470 Speaker 2: always opportunities in the market even now there's a lot 309 00:15:31,470 --> 00:15:33,610 Speaker 2: of good deals to be had. But you would need 310 00:15:33,610 --> 00:15:34,580 Speaker 2: to do the homework. 311 00:15:34,590 --> 00:15:37,300 Speaker 1: Is it then better to pay off as much as 312 00:15:37,300 --> 00:15:42,050 Speaker 1: you can off your loan now or wait this out. 313 00:15:42,670 --> 00:15:44,930 Speaker 2: Okay, so it depends on what you're looking to do. 314 00:15:44,940 --> 00:15:47,500 Speaker 2: I had this client who came to me, she told 315 00:15:47,500 --> 00:15:52,210 Speaker 2: me paul. I want the smallest loan amount over the 316 00:15:52,210 --> 00:15:57,490 Speaker 2: shortest loan period ever because I don't like interest. Right? 317 00:15:58,100 --> 00:16:00,090 Speaker 2: When I talked to her I found out that this 318 00:16:00,090 --> 00:16:03,490 Speaker 2: lady a was a single lady. She had her parents 319 00:16:03,490 --> 00:16:06,160 Speaker 2: staying with her Now her strategy was to use up 320 00:16:06,170 --> 00:16:09,630 Speaker 2: all the CPF funds to pay down the property so 321 00:16:09,630 --> 00:16:12,750 Speaker 2: that the loan will be minimum. Now when I worked 322 00:16:12,750 --> 00:16:16,110 Speaker 2: out the numbers for her I convinced her that the 323 00:16:16,110 --> 00:16:19,520 Speaker 2: strategy was a bit risky. Why? Because if she loses 324 00:16:19,520 --> 00:16:22,940 Speaker 2: her job with no cash back up, no cps backup 325 00:16:22,950 --> 00:16:25,280 Speaker 2: she would end up being exposed. 326 00:16:25,540 --> 00:16:27,630 Speaker 2: So at that point in time I worked out the numbers, 327 00:16:27,630 --> 00:16:31,119 Speaker 2: gave her a strategy on how to manage interest and 328 00:16:31,120 --> 00:16:34,100 Speaker 2: thankfully she took it six months later she came to me. 329 00:16:34,100 --> 00:16:35,550 Speaker 2: I was working in a bank then 330 00:16:36,290 --> 00:16:39,350 Speaker 2: and you know typically when people walk into the bank 331 00:16:39,360 --> 00:16:41,420 Speaker 2: to follow up on the transaction they did you six 332 00:16:41,420 --> 00:16:44,870 Speaker 2: months ago generally they're there to complain about something. 333 00:16:45,440 --> 00:16:47,100 Speaker 2: But actually she came to me and she said thank 334 00:16:47,100 --> 00:16:50,580 Speaker 2: you for convincing me otherwise because I had convinced her 335 00:16:50,580 --> 00:16:54,190 Speaker 2: to leave a buffer inside CPF and a buffer in cash. 336 00:16:54,200 --> 00:16:58,390 Speaker 2: And what had happened some three months after her transaction 337 00:16:58,620 --> 00:17:01,840 Speaker 2: was that she had been laid off. She told me 338 00:17:01,840 --> 00:17:03,660 Speaker 2: she said I lie in bed thinking of what would 339 00:17:03,660 --> 00:17:06,710 Speaker 2: have happened if I had no cpr balance, I have 340 00:17:06,710 --> 00:17:09,310 Speaker 2: no cash balance as a buffer for me too tight 341 00:17:09,310 --> 00:17:12,490 Speaker 2: through this period of time. So when you talk about 342 00:17:12,500 --> 00:17:14,250 Speaker 2: paying off in full, if you were to pay off 343 00:17:14,250 --> 00:17:15,600 Speaker 2: in full with no buffer, 344 00:17:16,540 --> 00:17:19,619 Speaker 2: then what will happen if somebody loses the job? What 345 00:17:19,630 --> 00:17:21,520 Speaker 2: is the backup plan? I think those are the things 346 00:17:21,520 --> 00:17:24,020 Speaker 2: that we need to think about. There is no one 347 00:17:24,020 --> 00:17:26,730 Speaker 2: solution for everyone. So that's why we urge people to 348 00:17:26,730 --> 00:17:28,760 Speaker 2: come to talk to us that property group finance to 349 00:17:28,760 --> 00:17:29,530 Speaker 2: work out 350 00:17:29,700 --> 00:17:31,879 Speaker 2: your individual strategy. 351 00:17:31,890 --> 00:17:36,020 Speaker 1: We talked a lot about rising interest rates with the 352 00:17:36,020 --> 00:17:39,370 Speaker 1: bank loans on the other side. I mean we've got 353 00:17:39,380 --> 00:17:45,030 Speaker 1: HDB loans that's there and quite consistent with the rate 354 00:17:45,030 --> 00:17:46,650 Speaker 1: that it's at now. 355 00:17:46,660 --> 00:17:50,280 Speaker 1: But the thing now is HDB loans are cheaper than 356 00:17:50,290 --> 00:17:53,629 Speaker 1: bank loans, that's something we haven't seen in a while 357 00:17:53,630 --> 00:17:58,109 Speaker 1: as well. Will the HDB rate go up you think 358 00:17:58,119 --> 00:18:02,300 Speaker 1: and can we rely on it as a stable option 359 00:18:02,310 --> 00:18:06,939 Speaker 1: at the time when there's a lot of developments in 360 00:18:06,950 --> 00:18:08,490 Speaker 1: other places in the market? 361 00:18:08,500 --> 00:18:13,050 Speaker 2: So HDB loans are priced at 0.1% above the CPF 362 00:18:13,060 --> 00:18:16,379 Speaker 2: ordering account of 2.5%. So 2.6. 363 00:18:16,780 --> 00:18:18,490 Speaker 2: The reason why they do it this way is because 364 00:18:18,490 --> 00:18:23,650 Speaker 2: the government funds HDB at a 2.5 rate. Now in 365 00:18:23,650 --> 00:18:26,760 Speaker 2: the recent cooling measures, I don't know whether you noticed this, 366 00:18:26,770 --> 00:18:30,760 Speaker 2: but they said that from now on all HDB loans, 367 00:18:30,760 --> 00:18:34,770 Speaker 2: we measured on 3%. What does that mean if you 368 00:18:34,770 --> 00:18:37,000 Speaker 2: work out backwards and you think about it 369 00:18:37,720 --> 00:18:42,040 Speaker 2: using the 0.1% above ordering account. What it could mean 370 00:18:42,040 --> 00:18:46,080 Speaker 2: is that ordering account could increase to 2.9% right, assuming 371 00:18:46,090 --> 00:18:50,939 Speaker 2: that the 0.1 spread still happens. So ordering account figures 372 00:18:50,950 --> 00:18:57,450 Speaker 2: are measured every quarter, so january, april july october next 373 00:18:57,450 --> 00:18:59,420 Speaker 2: year in january. So we'll find out whether the rates 374 00:18:59,420 --> 00:19:02,409 Speaker 2: will increase, but there's no reason for 375 00:19:02,600 --> 00:19:05,300 Speaker 2: The government will then say let's use 3% if they 376 00:19:05,300 --> 00:19:07,859 Speaker 2: don't intend to increase it. So there is a chance 377 00:19:07,859 --> 00:19:08,869 Speaker 2: that that would increase. 378 00:19:08,880 --> 00:19:12,740 Speaker 1: I see what lessons can we learn from this period 379 00:19:12,750 --> 00:19:16,220 Speaker 1: because before this, there are a lot of assumptions about 380 00:19:16,230 --> 00:19:20,680 Speaker 1: bank loans versus HDB loans. I've even heard people a 381 00:19:20,680 --> 00:19:23,620 Speaker 1: few years ago telling me, you know, bank loans will 382 00:19:23,630 --> 00:19:26,140 Speaker 1: always be lower than HDB loans and I was so 383 00:19:26,140 --> 00:19:29,659 Speaker 1: shocked like how can you say this? But 384 00:19:29,980 --> 00:19:33,040 Speaker 1: it just shows us how fast things can turn. So 385 00:19:33,040 --> 00:19:36,369 Speaker 1: what should be our main takeaways from this period as 386 00:19:36,369 --> 00:19:38,980 Speaker 1: we look at how we manage our finances. 387 00:19:38,990 --> 00:19:42,230 Speaker 2: I think a lot of people make these assumptions because 388 00:19:42,230 --> 00:19:46,680 Speaker 2: they don't find out what the implications are. So, knowledge 389 00:19:46,680 --> 00:19:49,869 Speaker 2: is very important. I think generally this is it don't 390 00:19:49,869 --> 00:19:53,889 Speaker 2: assume be prudent take it one step. Okay and constantly 391 00:19:53,890 --> 00:19:55,090 Speaker 2: review if you can 392 00:19:55,340 --> 00:19:59,560 Speaker 1: Yeah. And to remember that buying a property, you're locking 393 00:19:59,560 --> 00:20:02,820 Speaker 1: yourself for 25, 30 years and that's a long time. 394 00:20:02,820 --> 00:20:06,140 Speaker 1: A lot of things can happen in between. And Paul 395 00:20:06,140 --> 00:20:09,419 Speaker 1: you also mentioned about how the best loan really depends 396 00:20:09,420 --> 00:20:10,640 Speaker 1: on your circumstances. 397 00:20:10,650 --> 00:20:14,200 Speaker 1: And we shouldn't just look at the interest rates because 398 00:20:14,200 --> 00:20:17,960 Speaker 1: there are other factors to consider as well when looking 399 00:20:17,960 --> 00:20:20,550 Speaker 1: and deciding on what loan to take. Thank you so 400 00:20:20,550 --> 00:20:23,439 Speaker 1: much for sharing your insights today, paul. 401 00:20:23,450 --> 00:20:24,560 Speaker 2: It's been such a pleasure. 402 00:20:24,570 --> 00:20:25,950 Speaker 1: Thank you. Thank you. 403 00:20:28,680 --> 00:20:32,470 Speaker 1: Thanks to my guest paul. We if you enjoyed our podcast, 404 00:20:32,480 --> 00:20:35,280 Speaker 1: give us a five star rating and review. You can 405 00:20:35,280 --> 00:20:39,320 Speaker 1: also email us at CNN podcasts at mediacorp dot com 406 00:20:39,320 --> 00:20:42,620 Speaker 1: dot S. G. The team behind this episode is Joanne 407 00:20:42,619 --> 00:20:47,070 Speaker 1: chan Jacqueline chan Danieli and Christina robert. Till next time. 408 00:20:47,070 --> 00:20:48,450 Speaker 1: This is Sarah Khaldi.