DBS just announced a second round of revision to its FHR mortgage pegs this year effective from 13 September, following its last hike back on 8 June (MortgageWise took a break in June and gave a miss on reporting that).

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It comes as no surprise as deposit rates upsurge has been in the news front and centre in the past weeks.  The hike on mortgage rates was long overdue and in fact, fairly calibrated by DBS, in our opinion.  Let’s take a look. (Contact us for detailed tracking of DBS FHR history since 2014!)

Source: Announced by DBS on its website

Until today, there are still some clients we speak to who confuse FHR as fixed rate home loans. FHRs (fixed deposits home rate) are essentially prevailing fixed deposit rates for amounts from $1,000 to $9,999 which DBS used to price their mortgages. They are not fixed but are subject to revisions from time to time. And there are many “tranches” of FHR introduced by DBS over time. FHR6 tranche, based on the 6-month fixed deposit, was the latest launched to the market in February of 2021. It’s likely the peg which most of DBS home loans were pegged to in the past 1½ years, both new loans as well as repriced loans.  On this note, we do expect DBS to introduce a new tranche of FHR fairly soon.  

In this second round of increases on DBS home loans, FHR6 has now been revised up from 0.75% to 1.40% or an increase of 0.65%.  Earlier in June, it went from 0.20% to 0.75% or an increase of 0.55%.  This means in total FHR6 has gone up by a total of 1.20% so far this year.  In the same period, U.S. Fed had unleashed a total of 225 basis point increase (2.25%) to its federal funds rate starting in Mar (0.25%), followed by May (0.50%), Jun (0.75%) and July (0.75%).  So, not only was there a laggard effect as DBS held back in raising rates as long as they could, the increase has been well calibrated at roughly half the speed which Fed is going at.

However, this is unlikely to be the end with Fed now almost certain to unleash another 0.75% hike next week in its September FOMC following hot inflation numbers in the U.S. just released.  Depending on when inflation finally starts to roll over in the U.S., we do expect another series of hikes from Fed until the end of the year.  With that it means there’s likely to be another round of FHR rate hike by December.

Not only was there a laggard effect as DBS held back in raising rates for as long as they could, the increase has been well calibrated at roughly half the speed which Fed is going at.

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Local banks would also have been adjusting their mortgage lending BOARD rates for example MBR for OCBC home loans and MLC for UOB home loans.  But we are unable to track these unlike FHRs by DBS which are really deposit rates published by the bank on its website.  As such, it gives FHR more transparency where all revisions are visible in the public domain and can be tracked easily over time.  This probably explains the more restraint or calibrated nature of rate hikes on FHR.

Unsure if you should be considering FHR floating rate home loans, or simply lock down fixed rates before they go any higher?  Speak to us today.

It gives FHR more transparency where all revisions are visible in the public domain and can be tracked easily over time.  This probably explains the more restraint or calibrated nature of rate hikes on FHR.

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