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Wong Zhi Bin

03 Nov 2022

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Would a drop of property price impact current fixed rate loan owners eventually?

Pardon for my stupid question. Currently fixed rate loan owners are still not affected by rate hike, but under another situation, what if the property price drops due to recession. Would it be affecting fixed rate loan owner, such as bank would ask to make up the difference between property value and loan amount etc?

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Ace

04 Nov 2022

No. Property prices/value only impact those who buy / sell their houses. It's also impossible that bank ask to make up difference between property value and loan amount (recession or not).

Bank earns loan interest - fixed/floating. So if one takes up a e.g. 10-25 years loan, the bank would be happy to get the guaranteed interest 'salary', their recurring income, for this long period. Fixed rate only for limited period, after that will still be subjected by hike/changes (uncertainty to be exact).

The risks are only unless you are unable to pay any sort of bank loan (prinicipal + interest) (any sort of loan - mortgage or credit cards), then they will try to liquidate your assets - e.g. house. Except for during a pandemic when govt request for them to allow freezing of loan repayment to give ppl a breather... i doubt banks will ever b lenient in this area.

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