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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 1.20% to 1.75%.
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 who usually offers the lowest interest rate to acquire new customers to the bank. This is a fact-of-life across all industries.
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 or floating rate home loan:
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 Mar 2020, we are now projecting the 3-moth SIBOR to retrace back to levels last seen in 08 crisis ie. 0.40-0.50% and then trade sideways for quite a while until the macro outlook improves which will take 2-3 years.
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 home loan. And for the former, the fixed rate is only fixed for the initial 1 to 3 years of the loan tenure, after which interest reverts back to a floating rate at usually at a higher spread.
Next, homeowners would also need to choose the type of mortgage peg and there are three broad categories in Singapore: SIBOR, 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. 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 lock-ins, 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 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.