Homeseekers told: Choose 5-year loans

FOR CONSUMERS in need of house financing but anxious of the eventual increase in interest rates, going on a five-year loan fixing is seen becoming a popular option.

Ginbee Go, senior vice president for retail loans at leading consumer bank BPI Family, said in a recent interview with Inquirer that the bank had seen higher booking on longer-term housing loans, with about half of the bank’s mortgage lending fixed at five years.

“That started because the interest rate was very low on five years,” she said. She said the rate would go up gradually but long-term loans were more predictable and would allow the consumer to plan ahead.

“While there are some clients who don’t mind the interest rate swings, in general, the consumers—especially those who are employed and have fixed salaries—would like to be able to manage their monthly amortization,” she said.

The sweet spot for housing loan size is currently within the P3 to P5 million range. At BPI Family Bank, Go said a five-year housing loan could be fixed at 6.75 percent per annum and a three-year tenor could be fixed at 5 percent yearly.

In the last seven years, the country’s strong growth trajectory, ample liquidity in the financial system and the government’s improved fiscal position have contributed to the downtrend in interest rates.

“Those who had been fearing the rate hike, we always tell them that the best way to counter anxiety is to go long term and do a longer price fixing on their homes,” Go said.

With the start of the interest rate hike cycle in the United States, local interest rates could follow suit albeit in a gradual manner.