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Which bank’s home loan is best in Singapore?
There are different types of home loans in Singapore. Besides choosing the lowest rates, there are many other considerations you should consider:
What is the current home loan rates?
Current home loan rates fluctuate in the range of 1.00% to 1.50%.
See comprehensive display of the Top 10 home loan packages in Singapore – both fixed and floating rate, using our interactive Rates Display.
Should I reprice or refinance?
Reprice means changing of a home loan package within the same bank; Refinancing refers to moving your home loan to another bank with better rates altogether.
Quite obviously a big part of the decision to stay or switch banks centres on who offers better rates and the cost of staying (conversion fee) vs. cost of refinancing (legal fee and valuation fee). However, you may also want to explore the different loan features offered by various banks in Singapore which may sometimes outweigh the slight difference in rates per se.
Our observation from the collective experience of all our clients over the years has pointed to an obvious fact – it does not pay to stay loyal to the same bank which usually offers the lowest interest rate to new customers of the bank. This is a fact-of-life that spans all industries. So it pays to work with a professional mortgage broker who can compare for you the best home loan rates in Singapore before you sign.
How to choose between fixed rate home loan and floating rate home loan?
There are at least 6 factors to consider when choosing between fixed rate home loan or floating rate home loan (or ARM – adjustable rate mortgage):
How low will SIBOR go in 2020?
SIBOR (Singapore interbank offer rate) is the rate that banks lend to one another in the interbank or money market, and is administered by ABS in Singapore.
The 3-month SIBOR is the benchmark interest rate used to price loans and is highly correlated with US Fed funds rate.
As Fed has now crashed the fed funds rate to near zero sine March 2020, we are now projecting the 3-moth SIBOR to retrace back to levels last seen in 2008 crisis ie. 0.30-0.40% and then trade sideways for quite a while until the macro outlook improves which will be a considerable time from 3 years to even 6 years or longer.
(For HDB) How to choose between HDB loan vs private bank loan
As home loans from Housing Development Board are pegged to CPF Ordinary Account rate (currently at statutory low of 2.50%) + 0.10%, ie. 2.60%, this is way above market interest rates at the last peak (2019) and indeed so for much of the last decade.
We are of the view that with massive liquidity coming from repeated rounds of QE (quantitative easing) from central banks all over the world, and the dearth of inflation in this century, interest rates may no longer go back to the heights of above 2.50%. As such, we do recommend in general for HDB homeowners to refinance to the best HDB home loans from private banks as the gap (between HDB loan and bank loan) is simply too wide to be ignored.
(Note: We do have a minimum loan criteria of S$300,000 before we will broker any loan. Find out why)
For refinancing home loans in Singapore, or purchase of completed property, homeowners would first need to choose between fixed rate home loan or variable rate (floating rate) home loan. For fixed rate mortgages, Singapore banks generally only to fix the rate only for the initial 1 to 5 years of the loan tenure, after which interest reverts back to a floating rate and comes with a higher spread thereafter.
Next, homeowners would also need to choose the type of mortgage peg and there are three broad categories in Singapore: SIBOR (Singapore Interbank Offer Rate), FDR or traditional BOARD rate. SIBOR or the Singapore Interbank Offer Rate, analogous to LIBOR, has been used commonly to price home loans in Singapore since 2007. However the central bank MAS (Monetary Authority of Singapore) and ABS (Association of Banks in Singapore) have been preparing financial markets in recent years to switch over from SIBOR to SORA (Singapore Overnight Rate Average) loans within the next 3-4 years.
In 2014, lenders start to introduce FDR (fixed deposit rate) home loan mortgage pegs whereby the bank selects a pre-designated Singapore dollar fixed deposit tranche as the base rate to benchmark its home loans. It goes by different names according to the banks eg. FHR, FDR, TDMR, etc. We do extensive coverage of this FDR concepts in our blogs, something unique to the Singapore mortgage market.
Finally, besides interest rate, there are many other factors to consider when choosing a mortgage loan. This can come in the form of home loan lock-in periods, flexibility to prepay in parts or in full, legal fee subsidy or cash rebate (for refinancing), free conversion, to interesting home loan features like interest offset, combo loan (combining fixed and floating rate home loan), etc. Speak to a professional mortgage consultant in Singapore to understand the breadth of the market, dynamics involved, and how to navigate the changing regulatory framework on TDSR (Total Debt Servicing Ratio) etc.
MortgageWise.sg has been legally contracted to represent all major mortgage lenders in Singapore and the packages we broker include (but not limited to) : DBS Home Loans, UOB Home Loans, OCBC Home Loans, HSBC Home Loans, Maybank Home Loans, Stanchart Home Loans, Citibank Home Loans, Bank of China (BOC) Home Loans, CIMB Home Loans, RHB Home Loans, State Bank Of India (SBI) Home Loans, Hong Leong Finance (HLF) Home Loans.