DollarBack Mortgage launches a proprietary home loan solution

Mortgages can be complex financial products even for the experienced, much less the layman. Having a home in Singapore is one of the most significant milestones that we all strive for. But, how much thought do we put into securing a mortgage which extends to 10, 15, or even 30 years?

With the space that we currently live in, it is no surprise that most of our financial decisions are impacted by technology. Thus, it shouldn’t be hard to think that identifying the best mortgage loan should be done the same way.

To tackle the common questions of “Which bank is best for my home loan?” or “Will mortgage rates in Singapore be going up or down?”, Dollarback Mortgage has developed a proprietary solution in the form of a predictive analysis engine that takes the guesswork out of picking a home loan option.

How DollarBack Mortgage’s new predictive analysis engine works

Simply put, the current process of deciding on a home loan option is ultimately based on which bank offers the lowest interest rate at the moment a decision is made. This is myopic considering that loan tenures run into decades. Any future considerations of how the interest rates will change or how banks will react to these changes are pretty much left to guesswork or just left out of the equation entirely.

By relying on historical data from both economic cycles and interest rate trends in the past, Dollarback Mortgage is now able to offer homeowners an insight into how their mortgage rates might change and which home loan option is the best for both now and the future.

This largely makes the decision-making process when identifying a mortgage option more streamlined with less uncertainties on how monthly installments might change in the next few years to come and help Singaporeans prepare their finances accordingly.

Dollarback Mortgage’s predictive engine provides scenarios on the interest rate forecast on a quarterly basis according to a confidence interval from the historical data collected.

As a result, we get the ability to extrapolate the type of interest rates that banks might release at specific economic cycles and a general trend of how the interest rate environment will look like for minimally the next 3 years.

“By having a forecast backed by data of how the interest rate on mortgages might change, homeowners can decide on which home loans meet their present and future needs, instead of just hoping to refinance to a lower interest rate over the next 2 or 3 years,” Jovin Pendhar, Director of DollarBack Mortgage shares.

For example, during the 2008 financial crisis, when the global economy declined, mortgage rates from banks decreased significantly and stayed that way for about six years before any increases were made.

By identifying the historical economic factors which acted as a prelude to the rapid decrease of mortgage rates in Singapore and the subsequent increases, the predictive engine is able to identify similar factors which might be occurring in the present economic climate and the impact they will have on the home loan interest rates in Singapore.

Armed with this data and information, Dollarback’s mortgage consultants are able to advise homeowners on which mortgage options are best recommended for their needs not only for the present but for t up to a three-year runway with a fair amount of certainty.

A comprehensive data-driven approach

All interest rate benchmarks for home loans in Singapore including SORA, SIBOR, Fixed Deposit rates, Board rates as well as global and domestic data such as the US Federal Reserve rates, unemployment rates, CPI and PPI indexes are analyzed.

In short, we use data that comprises all the factors that affect an economy. From this, we are then able to forecast probable scenarios in future and create a picture of how global interest rates and mortgage rates in Singapore will be affected.

Optimizing your mortgage and maximizing savings for the long term

With the use of such data and a predictive analysis engine, knowing when the best time for you to refinance your mortgage loan doesn’t need to be a guessing game anymore.

For example, if a homeowner has a lock in period penalty to pay on their current home loan and if the forecast indicates a downtrend in interest rates, they can decide if paying the penalties now, will result in greater interest savings in future to offset their penalties and enjoy a lower interest rate for a longer-term.

How predictive analysis works

Predictive analysis uses historical and new data to predict unknown future events, trends, and behaviors.

Basically, predictive analytics is a modern decision-making tool that forecasts the future using historical data, machine learning techniques, and statistical algorithms.

Some benefits of predictive analysis include:

• Enhancing operations: Most companies are now using predictive analysis models to predict inventory and manage their resources. Basically, predictive analytics allows organizations to run their operations effectively.
• Maximizing marketing campaigns: Through predictive analytics, organizations can know how customers respond to their products and where they have opportunities to promote. In general, predictive models assist businesses in attracting and retaining their customers.
• Minimize risk: One of the most popular predictive analytics in financial organizations like banks is Credit Scores. Your credit score is just a number generated using a predictive model which uses your historical financial data to determine your creditworthiness.
• Detect and reduce fraud: Banks and other financial institutions detect and reduce fraud through predictive analytics of suspicious behavior. Due to advanced technology, cybersecurity is a concern. For this reason, financial institutions use high-performance behavioral analytics to examine all actions on their network in actual time. This helps them to detect suspicious activities, which might indicate high threats and fraud.

A tried and tested solution for mortgage rate predictions in Singapore

Before the start of the Covid-19 pandemic, DollarBack Mortgage carried out a test with a chosen group of clients. During the test, interest rates from certain banks in Singapore were on the downtrend. Using our predictive engine, we forecasted that interest rates were to decline even further and for more banks to offer lower mortgage rates.

At that time, SIBOR rate mortgages were higher than other types of home loans. However, we advised our clients to consider SIBOR rate home loans based on the forecast we had done. Although counter-intuitive and bewildering to our clients, a few were open to the idea and decided the risk was worth taking.

Interestingly, even though our predictions were for rates to drop gradually on a quarterly cycle, the unexpected effects of the pandemic led to crashing mortgage rates within a timeline much shorter than expected.

As a result, clients that did take up a SIBOR rate mortgage before the pandemic hit, enjoyed interest rates as low as 0.20% which was unprecedented. “It is definitely great to know that our clients are maximizing interest savings through what we have developed and, in a way, “beat the market” if you could say, but there is ultimately no magic solution or program that can definitively state what interest rates will be like.

Just like the stock markets, mortgage rates are very much fluid, the best that we aim to do is to provide more clarity and enable homeowners to be more confident when identifying financing for such a prized possession like a home in Singapore,” Jovin Pendhar, Director of DollarBack Mortgage shares.

Looking forward, the next goal would be to automate DollarBack Mortgage’s advisory process so that clients can access our predictive analysis engine directly through our website for an instant recommendation on the lowest interest rates and best home loan for their needs.

To get the latest mortgage rates and home loan insights in Singapore, contact a DollarBack Mortgage consultant.