Standard Chartered Mortgage One


I recently did a repricing on my housing loan. I changed my SGD SIBOR from 3 months to 1 month as I believe interest rate will remain low for a longer period of time. Euro and Japan are adopting negative interest rates, Yellen is also considering it. I notice that 3 months - 1 year SIBOR are always trading at a premium due to its prolonged fix rate(as shown below). As long as interest rate remains low, a 1 month SIBOR option will always be more efficient in my view. Besides the SIBOR switch, I have also gotten a much lower fixed interest margin compared to my previous package. The below table is the latest SIBOR rate.
In addition to the much lower interest rate I am getting after the repricing, I was surprised by the new feature that I have gotten. My mortgage officer tagged me to their new Mortgage One loan package which gives the exact interest that my loan is charging for the month, to the deposit account that my loan is deducted from. Which means my saving account has literally become a hedge against my loan. Do note that only 2/3 of the money in my savings account gets the interest rate, the other 1/3 gets 0.25%. The amount is capped at the total loan that you get. The interest that I earned from my savings account will be used to offset my loan principle. Quite a niffy feature. This means if lets say my housing loan interest spike to 10% p.a(hypothetical), my savings account will give me 10% interest p.a for 2/3 of my money inside. For more info you can click here.


My loan is much lesser than the above illustrated, I can pay up my loan immediately, but I don't see the reason to now as the money can be invested in an investment graded bond to get 5.125% which is almost 5x higher than my loan interest. I don't know how this loan package compares with the other banks but I find the new savings account hedge feature pretty useful to me. I will most likely put money into this savings account after maxing out BOC smartsaver. Lets say if my loan interest goes to 2%, I will be getting effectively 1.413% p.a for the amount I put into this savings account(2/3 2% + 1/3 0.25%) which will be more superior than CIMB Fastsaver(1%). Just sharing.


25 comments :

  1. isnt the US Fed planning on interest rate hikes sometime in the next Q?

    ReplyDelete
    Replies
    1. In my view its unlikely. In my view a 1 month sibor rate is the most efficient in a stagnant or decreasing interest rate environment. Furthermore, it doesnt rate at a premium. My view only.

      Delete
  2. btw, does your 1M sibor have a lock in period?

    ReplyDelete
    Replies
    1. no lock in its basically:

      1 mth sibor +0.65% first year
      1 mth sibor +0.75% second year
      1 mth sibor +0.85% third year
      1 mth sibor +0.95% forth year there after.

      Statistically speaking I also find 1 mth sibor to be lower than 3 mth mainly due to the premium for 3 mth.

      Delete
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  10. Hi
    Now that you are 1 year into the scb mortgage1, do you find that it really does reduce the principle?
    Can you share more details using some examples?

    How does it work? in particular the 2/3 of loan interest saving?
    The interest rate chargeable by bank is at the same time being returned for 2/3 of deposit amount. Assume I put in a huge amount and 2/3 of my deposit is equal to loan amount, effectively I pay 0 interest? and what I am supposed to pay in interest is then used to draw down the principal sum, effectively reducing the principle sum?

    Considering that the Sibor will increase but my interest is zerolised based on above, can I say I am effectively only paying principal payment and at the same time, the interest that is supposed to be charged will be used to draw down the principal.
    So I should hope for a higher sibor rate????

    Hope for your sharing.

    Tks

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