Maybe it's good to refinance home-loans now. Interest-rate appears to stop dropping

[Dr Christopher Cheok C S]

Interest rates dropped in the 2024 after the steep-climb 2-3 years ago.

Despite another 25bp cut by Fed in December, US treasury-rates resume uptrend and all clocked above 4%pa by Jan 2025.

1. Together with a stronger USD in 2025, it appears that our local home-loan rates will stop dropping. Consumers may consider locking in the current rates.

2. Banks cannot lend beyond their capital base or deposits. Due to the higher cost of funds and dilution of shareholdings, they are also reluctant to shore up their capital base. As a result, some low-risk companies & mid-risk REITs are now having difficulties refinancing their >100m loans. This hints that the some local banks have overstretched their lendings.

3. On the other hands, banks are backing finance companies to do the dirty job to reach out to weak borrowers. I suspect these financial institutions are plotting to repossess collaterals (eg properties) which will be forfeited when borrowers default.

 

[Dr Christopher Cheok C S]

Why are more people below age of 40 bankrupted in the past year? I speculate that it was like the historical-high for this age-group.

Our property prices sky-rocketed, while our capacity-to-pay lags. For those below 40s, many just got married and in their prime. Many jumped into condos with their high-pays (and high-gearings), then interest rates spiked 2-3 years ago and some even got retrenched last year, and felt the squeeze.

One thing leads to another. There is high credit-limit on their credit cards because of their earlier income; they used them up to service their debts and sank deeper into financial debts.

 

[Dr Christopher Cheok C S]