DBS Bank Singapore

DBS Home Loan Rates To Go Up

DBS has announced on its website it is raising its fixed deposit rates from 7-month to 60-month on 13 December.

DBS increase FHR 2018

Source: DBS website

 

What this means for homeowners whose mortgages are with DBS is that they are about to see a slight increase on their monthly repayment come next month, unless they have opted for fixed rates.  DBS home loan rates are tied to its popular FHR (Fixed Deposit Home Rate) mortgage peg.

Compare All Latest Rates 2018

 

In our opinion this round of increases on DBS home loan rates is appropriately calibrated at about half the usual increase of 0.30% we observed in each rate revision by banks this year.  DBS has increased by an average of only 0.15% (see table below) which is in keeping with the recent rise in the benchmark interest rate of 3-month SIBOR.  SIBOR has risen recently from its last trading level of 1.63% to the current 1.76% (see chart) and we are expecting it to rise further before the year is over with US Fed widely tipped to deliver on its 4thand final rate hike for the year in this month’s FOMC on 18-19 December.

 

Here is a snapshot of the FHR tranches affected:

 

FHR Tranches

 

Old ValueNew ValueIncrease ByEffective Date
FHR (ave 12/24 mth)0.975%

12M: 0.80%
24M: 1.15%

 

1.075%

12M: 0.95%
24M: 1.20%

0.10%13 Dec 2018
FHR18

 

0.95%1.10%0.15%13 Dec 2018
FHR9

 

0.80%0.95%0.15%13 Dec 2018
FHR8

 

0.50%0.675%0.175%13 Dec 2018

 

 

DBS, being the market leader, has always taken the lead in revising rates and we are expecting all the other lenders to follow suit very quickly.  Very probable, banks being privy to events in the interbank market, have already seen movements in rates in anticipation of the next tightening by the central bank. There are tell-tale signs as in recent weeks we have seen quite a number of banks raising their fixed home loan rates to levels not seen in Singapore in the last 10 years.  The prevailing 2-year fixed rate home loan rates has now hit 2.40%!

Compare All Latest Rates 2018

 

 

To give homeowners the right perspective on what we mean by broad market movements of late, here is a list of lenders who have moved up their fixed home loan rates in December:

 

As At 6-Dec-2018

 

Fixed Rate
(Nov-2018)
Revised Fixed Rate
(Dec-2018)
DBSYear 1: 2.28% (fixed)
Year 2: 2.28% (fixed)

Year 1: 2.48% (fixed)
Year 2: 2.48% (fixed)
Year 3: 2.48% (fixed)

Year 1: 2.38% (fixed)
Year 2: 2.38% (fixed)

Year 1: 2.68% (fixed)
Year 2: 2.68% (fixed)
Year 3: 2.68% (fixed)

UOBYear 1: 2.38% (fixed)
Year 2: 2.38% (fixed)

Year 1: 2.38% (fixed)
Year 2: 2.38% (fixed)
Year 3: 2.58% (fixed)

Year 1: 2.48% (fixed)
Year 2: 2.48% (fixed)

Year 1: 2.68% (fixed)
Year 2: 2.68% (fixed)
Year 3: 2.68% (fixed)

OCBCYear 1: 2.38% (fixed)
Year 2: 2.38% (fixed)
Year 1: 2.58% (fixed)
Year 2: 2.58% (fixed)
HSBCYear 1: 2.15% (fixed)
Year 2: 2.15% (fixed)

Year 1: 2.30% (fixed)
Year 2: 2.30% (fixed)
Year 3: 2.30% (fixed)

Year 1: 2.50% (fixed)
Year 2: 2.50% (fixed)

Year 1: 2.65% (fixed)
Year 2: 2.65% (fixed)
Year 3: 2.65% (fixed)

MAYBANKYear 1: 2.28% (fixed)
Year 2: 2.28% (fixed)
Year 1: 2.48% (fixed)
Year 2: 2.48% (fixed)

 

 

There are only a handful of banks yet to adjust their fixed home loan rates and we are expecting them to do so soon, so there now lies a small window of opportunity for those seeking to refinance before the year is over (those with lock-in expiry by June 2019 should call us for an obligation-free chat). For those who act fast, we could still get you fixed rate at 2.10% over the next two years which translates into substantial savings as we expect the hikes to continue for little more and stabilized at the 2.50% level.

 

Being thought leader in the mortgage space, it is our responsibility to report on rate hikes by all lenders in the market place so that we can be trusted by homeowners in Singapore to always provide the most accurate and up-to-date information on mortgage rates and news. Work with our small team of very experienced mortgage consultants who have been diligently serving since 2014.

 

 

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest developments in the industry, providing useful mortgage tips, and making sense of rate movements.  We seek to build trust with clients over the longer term instead of doing product-peddling for quick one-time deals.  That’s why we always present “whole-of-market” perspective including home loan packages that some banks do not pay us.  Read our clients’ testimonials.

 

Compare All Latest Rates 2018

 

 

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Home Loan Best Deal

Best Home Loans In Singapore

Last Updated 1-Dec-2018

As the year winds down to a close, we thought we would do a review and update of the best home loans in Singapore in each of the category below (see Table of Content) as we near the 4th and final rate hike by US Fed in 2018 in its December FOMC.  This means that potentially we could see another spurt of rate adjustments by all major mortgage lenders as we start off the year in 2019, especially if 3-month SIBOR makes its dash to cross the all-important 2% level in the final weeks of 2018.

Hence, this review would be timely for those who are back from year-end vacations, to take this lull period from work to do a serious review of their mortgages, especially for those with lock-ins expiring in the 1st half of 2019 by 30 Jun.  Contact us for an obligation-free discussion.  For a home loan of $700,000 at an average interest over 25 years at 3.5%, when serviced to the very end of the tenure, the total interest paid to the bank would add up to $351,310, almost 50% of the original loan amount borrowed!  It is important to make sure you always sign onto best housing loan package with the lowest interest and best overall terms, be it you refinance or stay put with your current bank.  Let us help you achieve that.

As this post can only be updated periodically (see last updated date at top), we have input all the interest rate raw data from all major 16 mortgage lenders in the market and churn out the latest and most updated housing loan packages using our interactive Rates Display widget which you can access throughout this post or on our website:

Compare All Latest Rates 2018

 

Table Of Content

A. What Are The Different Types Of Home Loans & Mortgage Pegs?
B. Best Floating Rate (FDR/BOARD) Home Loans For Private Property
C. Best Floating Rate (SIBOR) Home Loans For Private Property
D. Best Fixed Rate Home Loans For Private Property
E. Best Home Loans For Private Property BUC (Building Under Construction)
F. Best Floating Rate (FDR/BOARD) Home Loans For HDB
G. Best Floating Rate (SIBOR) Home Loans For HDB
H. Best Fixed Rate Home Loans For HDB
I. Overview Of All Best Home Loans Across The Board

 

A. What Are The Different Types Of Home Loans And Mortgage Pegs?

In 2018, with removal of FDR (Fixed Deposit Rate) home loans by some banks, only 3 banks now offer such home loans pegged to a pre-designated sing dollar fixed deposit tranche rate:  DBS with its FHR8 (Fixed Deposit Home Rate), StanChart with its 36FDR, and HSBC with its 24TDMR (Time Deposit Mortgage Rate).  By and large, in view of rising rates in 2018, most homeowners have scurried to sign on fixed rate home loan this year, or at least take a bet on floating rate with the FDR mortgage peg which has proven to be a laggard and more stable alternative to SIBOR, notwithstanding the few rounds of rate hikes on FDR this year (see our chart on the tracking of FDR movements)

In general the three types are mortgage pegs used in Singapore are FDR, SIBOR, and the traditional BOARD rate set by banks.  FDR, being fixed deposit rates, are also set by banks but are published on banks’ website which makes them more transparent than BOARD.  SIBOR offers the most transparency as it is a rate administered by ABS (Association of Banks in Singapore) and determined solely by market forces in the interbank and hence no one single bank could unilaterally raise its value.

 

B. Best Floating Rate (FDR/BOARD) Home Loans For Private Property

Floating rate, as opposed to fixed rate, is when the interest rate is “reset” each time there is a change in the value of the underlying mortgage peg which can be FDR, BOARD or SIBOR.  The “spread”, or the mark-up above this peg to derive the final interest charged, is a contracted rate which will not change.  We will look at SIBOR as a category separately.

With general interest rate staying low below 2% in the past few years, floating rate home loans have been popular in Singapore until 2018, when fixed rate home loan become the preferred choice for most.

At the prevailing floating rate of 2.00%, for every $100,000 of outstanding loan, the monthly instalment works out to $423.85 on a tenure of 25 years. So for a typical home loan of $700,000, monthly instalment will come to $2,967.

1-Dec-2018new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loan
Loan TypeDBS Floating FDROCBC Floating BOARDUOB Floating BOARDHSBC Floating FDRSCB Floating FDRMAYBANK Floating BOARD
Loan PegFHR8 = 0.50%MBR = 1.55%MR = 0.85%TDMR24 = 0.65%36FDR = 0.97%SRFR2 = 4.50%
Year 1FHR8 + 1.45% = 1.95%MBR + 0.60% = 2.15%MR + 1.23% = 2.08%TDMR24 + 2.03% = 2.68%36FDR + 0.98% = 1.95%SRFR2 - 2.45% = 2.05%
Year 2FHR8 + 1.45% = 1.95%MBR + 0.60% = 2.15%MR + 1.23% = 2.08%TDMR24 + 2.03% = 2.68%36FDR + 0.98% = 1.95%SRFR2 - 2.45% = 2.05%
Year 3FHR8 + 1.45% = 1.95%MBR + 0.60% = 2.15%MR + 1.23% = 2.08%TDMR24 + 2.03% = 2.68%36FDR + 0.98% = 1.95%SRFR2 - 2.45% = 2.05%
Year 4 & ThereafterFHR8 + 1.45% = 1.95%MBR + 0.80% = 2.35%MR + 1.23% = 2.08%TDMR24 + 2.03% = 2.68%36FDR + 0.98% = 1.95%SRFR2 - 2.12% = 2.38%
Lock-In Period2 years2 years2 years2 years2 years2 years
Partial Redemption Penalty1.50%Nil (up to 50%)Nil (left $200K)1.50%1.50%1.50%
Full Redemption Penalty1.50%1.50%1.50%1.50%1.50%1.50%
Legal Subsidy/RebateYesYes0.40% of loanYesYes0.40% of loan
Subsidy Cap At$2,000$2,000$1,800$2,000$1,800$2,000
Min. Loan (for subsidy)$500,000$500,000$100,000$500,000$400,000$100,000
new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loan

Compare All Latest Rates 2018

 

C. Best Floating Rate (SIBOR) Home Loans For Private Property

As the value of SIBOR has increased since the start of the year, even though banks have noticeably reduced the spread above this SIBOR peg, the final rate is now averaging 1.8% to 1.9%.

Generally those with a more dovish view on rates would consider taking on a SIBOR based housing loan as it would be the first to rise in any event of further tightening of liquidity in the market when US Fed continues on its current trajectory of rate hike.  Should the gap between fixed and floating continue to widen, more may be drawn to the more transparent floating rate after suffering couple of rate hikes on FDR mortgage peg in the past.  After all, should there be a reversal and global economy slides into recession because of trade war, SIBOR would also be the first to come down.

Some of the best home loans based on 1-month and 3-month SIBOR for the current month are summarised below:

1-Dec-2018new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loan
Loan TypeOCBC Floating SIBORCITIBANK Floating SIBORHSBC Floating SIBORSCB Floating SIBORCIMB Floating SIBOR
Loan Peg3-month SIBOR1-Month SIBOR1-Month SIBOR1-Month SIBOR1-Month SIBOR
Year 13-month SIBOR + 0.30%1-month SIBOR + 0.20%1-month SIBOR + 0.35%1-month SIBOR + 0.30%1-month SIBOR + 0.10%
Year 23-month SIBOR + 0.40%1-month SIBOR + 0.25%1-month SIBOR + 0.35%1-month SIBOR + 0.30%1-month SIBOR + 0.15%
Year 33-month SIBOR + 0.50%1-month SIBOR + 0.45%1-month SIBOR + 0.35%1-month SIBOR + 0.30%1-month SIBOR + 0.25%
Year 43-month SIBOR + 0.50%1-month SIBOR + 0.55%1-month SIBOR + 0.70%1-month SIBOR + 0.30%1-month SIBOR + 0.60%
Year 53-month SIBOR + 0.50%1-month SIBOR + 0.55%1-month SIBOR + 0.70%1-month SIBOR + 0.30%1-month SIBOR + 0.60%
Year 6 & Thereafter3-month SIBOR + 0.50%1-month SIBOR + 0.55%1-month SIBOR + 0.70%1-month SIBOR + 0.30%1-month SIBOR + 0.60%
Lock-In Period2 years2 years2 years2 years2 years
Partial Redemption PenaltyNil (up to 50%)Nil (left $200K)1.50%1.50%1.50%
Full Redemption Penalty1.50%1.50%1.50%1.50%1.50%
Legal Subsidy/RebateYes0.40% of loanYesYes0.40% of loan
Subsidy Cap At$2,000$1,800$2,000$1,800$2,000
Min. Loan (for subsidy)$500,000$100,000$500,000$400,000$100,000
new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loan

Compare All Latest Rates 2018

 

D. Best Fixed Rate Home Loans For Private Property

Fixed rates has proven to be popular in 2018 against the backdrop of 3-month SIBOR rising from 1.12% to current 1.76% (as at Nov-2018) and banks  adjusting up their FDR rates repeatedly leaving many homeowners wary of floating rate home loans.

However, now that fixed rates are all above 2% psychological level, and with more uncertainties present in the global economy now due to trade wars, it will be interesting to watch how the market responds to the question of fixed versus floating rate mortgage.  Generally, a fixed rate in the range of 2% to 2.30% is still historically low and below the long-term neutral rate of 2.50%-3.00% that US Fed is trying to achieve by end of 2019.

At the lowest 2-year fixed rate of 2.10% , for every $100,000 of outstanding loan, the monthly instalment works out to $428.74 on a tenure of 25 years. So for a home loan of $700,000, monthly instalment will come to $3,001.

1-Dec-2018new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loanindia bank housing loannew purchase housing loan
Loan TypeDBS Fixed RateOCBC Fixed RateUOB Fixed RateHSBC Fixed RateMAYBANK FixedBANK OF CHINA FixedSTATE BANK INDIA FixedCITIBANK Fixed
Loan PegFHR8 = 0.50%MBR = 1.55%1M SIBOR1M SIBORSRFR2 = 4.50%3M SIBORBOARD = 6.00%1M SIBOR
2-Year FixedY1: 2.38% (Fixed)Y1: 2.58% (Fixed)Y1: 2.48% (Fixed)Y1: 2.50% (Fixed)Y1: 2.48% (Fixed)Y1: 2.10% (Fixed)Y1: 2.15% (Fixed)Y1: 2.28% (Fixed)
Y2: 2.38% (Fixed)Y2: 2.58% (Fixed)Y2: 2.48% (Fixed)Y2: 2.50% (Fixed)Y2: 2.48% (Fixed)Y2: 2.10% (Fixed)Y2: 2.15% (Fixed)Y2: 2.28% (Fixed)
3-Year FixedY1: 2.68% (Fixed)nilY1: 2.68% (Fixed)Y1: 2.65% (Fixed)nilY1: 2.25% (Fixed)nilY1: 2.48% (Fixed)
Y2: 2.68% (Fixed)nilY2: 2.68% (Fixed)Y2: 2.65% (Fixed)nilY2: 2.25% (Fixed)nilY2: 2.48% (Fixed)
Y3: 2.68% (Fixed)nilY3: 2.68% (Fixed)Y3: 2.65% (Fixed)nilY3: 2.25% (Fixed)nilY3: 2.48% (Fixed)
Lock-In Period2/3 years2 years2/3 years2/3 years2 years2/3 years2/3 years2/3 years
Partial Redemption Penalty1.50%1.50%1.50%1.50%1.50%1.75%1.50%1.50%
Full Redemption Penalty1.50%1.50%1.50%1.50%1.50%1.75%1.50%1.50%
Legal Subsidy/RebateYesYes0.40% of loanYes0.40% of loanYes0.40% of loan0.20% of loan
Subsidy Cap At$2,000$2,000$1,800$2,000$2,000$1,800$1,000$2,500
Min. Loan (for subsidy)$500,000$500,000$100,000$800,000$100,000$500,000$250,000$100,000
new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loan

Compare All Latest Rates 2018

 

E. Best Home Loans For Private Property BUC (Building Under Construction)

There is no fixed rate for properties under construction and one can only apply for a free conversion within the bank (usually included as a feature) to a fixed rate home loan when it is near to T.O.P, or usually within 3-6 months of T.O.P.

The good news though is that as competition for new purchase loans at all the property launches and showflats are intense, banks would normally reduce their spread on such floating rate home loans when compared to those for completed properties.

At the prevailing floating rate of 1.95% for BUC properties, for every $100,000 of outstanding loan, the monthly instalment works out to $421.42 on a tenure of 25 years. So for a typical home loan of $700,000, monthly instalment will come to $2,950.

1-Dec-2018new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loan
Loan TypeDBS Floating FDROCBC Floating BOARDUOB Floating BOARDSCB Floating FDRMAYBANK Floating BOARD
Loan PegFHR8 = 0.50%MBR = 1.55%MR = 0.85%36FDR = 0.97%SRFR2 = 4.50%
Year 1FHR8 + 1.45% = 1.95%MBR + 0.40% = 1.95%MR + 1.10% = 1.95%36FDR + 0.93% = 1.90%SRFR2 - 2.55% = 1.95%
Year 2FHR8 + 1.45% = 1.95%MBR + 0.40% = 1.95%MR + 1.10% = 1.95%36FDR + 0.93% = 1.90%SRFR2 - 2.55% = 1.95%
Year 3FHR8 + 1.45% = 1.95%MBR + 0.40% = 1.95%MR + 1.10% = 1.95%36FDR + 0.93% = 1.90%SRFR2 - 2.55% = 1.95%
Year 4 & ThereafterFHR8 + 1.45% = 1.95%MBR + 0.40% = 1.95%MR + 1.10% = 1.95%36FDR + 0.93% = 1.90%SRFR2 - 2.55% = 1.95%
Lock-In PeriodNilNilNilNilNil
Partial Redemption PenaltyNilNilNilNilNil
Full Redemption PenaltyNilNilNilNilNil
Cancellation Fee0.75%0.75%0.75%1.50%1.50%
Legal Subsidy/RebateNilNilNilNilNil
Subsidy Cap AtNilNilNilNilNil
Min. Loan$100,000$200,000$100,000$100,000$100,000
new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loan

Compare All Latest Rates 2018

 

F. Best Floating Rate (FDR/BOARD) Home Loans For HDB

Floating rates for HDB property would usually be similar to that for private property in general.  The main difference between the two comes in the form of much lower legal subsidy or cash rebate given, which then increases the overall costs for refinancing from one bank to another.

For this reason, we tend to advise HDB clients to reprice especially for outstanding home loans of below $300,000 which is the minimum loan size for us to broker.  And we have good reasons for that which you may like to read in the form of a case study here.

At the prevailing floating rate of 2.00%, for every $100,000 of outstanding loan, the monthly instalment works out to $423.85 on a tenure of 25 years. So for a typical HDB home loan of $350,000, monthly instalment will come to $1,484.

1-Dec-2018new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loan
Loan TypeDBS Floating FDROCBC Floating BOARDUOB Floating BOARDHSBC Floating FDRSCB Floating FDRMAYBANK Floating BOARD
Loan PegFHR8 = 0.50%MBR = 1.55%MR = 0.85%TDMR24 = 0.65%36FDR = 0.97%SRFR2 = 4.50%
Year 1FHR8 + 1.45% = 1.95%MBR + 0.60% = 2.15%MR + 1.23% = 2.08%TDMR24 + 2.03% = 2.68%36FDR + 0.98% = 1.95%SRFR2 - 2.45% = 2.05%
Year 2FHR8 + 1.45% = 1.95%MBR + 0.60% = 2.15%MR + 1.23% = 2.08%TDMR24 + 2.03% = 2.68%36FDR + 0.98% = 1.95%SRFR2 - 2.45% = 2.05%
Year 3FHR8 + 1.45% = 1.95%MBR + 0.60% = 2.15%MR + 1.23% = 2.08%TDMR24 + 2.03% = 2.68%36FDR + 0.98% = 1.95%SRFR2 - 2.45% = 2.05%
Year 4 & ThereafterFHR8 + 1.45% = 1.95%MBR + 0.80% = 2.35%MR + 1.23% = 2.08%TDMR24 + 2.03% = 2.68%36FDR + 0.98% = 1.95%SRFR2 - 2.12% = 2.38%
Lock-In Period2 years2 years2 years2 years2 years2 years
Partial Redemption Penalty1.50%Nil (up to 50%)Nil (left $200K)1.50%1.50%1.50%
Full Redemption Penalty1.50%1.50%1.50%1.50%1.50%1.50%
Legal Subsidy/RebateYesYes0.40% of loanYesYes0.40% of loan
Subsidy Cap At$2,000$1,800$1,800$1,000$1,800$2,000
Min. Loan (for subsidy)$500,000$300,000$80,000$200,000$400,000$100,000
new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loan

Compare All Latest Rates 2018

 

G. Best Floating Rate (SIBOR) Home Loans For HDB

SIBOR home loans, being a transparent mortgage peg, can actually work quite well for HDB homeowners as over the long term where business cycles swing up and down, homeowners may pay more initially when rate rises but the reverse is also true when SIBOR comes down first and they will reap the savings immediately.

The main concern is still that of refinancing costs for smaller loan sizes and hence homeowners are better off on a SIBOR floating rate with a constant and long-term low spread.

Some of the best SIBOR-based home loans for HDB are summarised here:

1-Dec-2018new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loan
Loan TypeOCBC Floating SIBORCITIBANK Floating SIBORHSBC Floating SIBORSCB Floating SIBORCIMB Floating SIBOR
Loan Peg3-month SIBOR1-Month SIBOR1-Month SIBOR1-Month SIBOR1-Month SIBOR
Year 13-month SIBOR + 0.30%1-month SIBOR + 0.20%1-month SIBOR + 0.35%1-month SIBOR + 0.30%1-month SIBOR + 0.10%
Year 23-month SIBOR + 0.40%1-month SIBOR + 0.25%1-month SIBOR + 0.35%1-month SIBOR + 0.30%1-month SIBOR + 0.15%
Year 33-month SIBOR + 0.50%1-month SIBOR + 0.45%1-month SIBOR + 0.35%1-month SIBOR + 0.30%1-month SIBOR + 0.25%
Year 43-month SIBOR + 0.50%1-month SIBOR + 0.55%1-month SIBOR + 0.70%1-month SIBOR + 0.30%1-month SIBOR + 0.60%
Year 53-month SIBOR + 0.50%1-month SIBOR + 0.55%1-month SIBOR + 0.70%1-month SIBOR + 0.30%1-month SIBOR + 0.60%
Year 6 & Thereafter3-month SIBOR + 0.50%1-month SIBOR + 0.55%1-month SIBOR + 0.70%1-month SIBOR + 0.30%1-month SIBOR + 0.60%
Lock-In Period2 years2 years2 years2 years2 years
Partial Redemption PenaltyNil (up to 50%)Nil (left $200K)1.50%1.50%1.50%
Full Redemption Penalty1.50%1.50%1.50%1.50%1.50%
Legal Subsidy/RebateYes0.40% of loanYesYes0.40% of loan
Subsidy Cap At$2,000$1,800$2,000$1,800$2,000
Min. Loan (for subsidy)$500,000$100,000$500,000$400,000$100,000
new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loan

Compare All Latest Rates 2018

 

H. Best Fixed Rate Home Loans For HDB

As there are some banks that do not cater to HDB segments, or they have more attractive fixed rates only for loans above $500,000, HDB homeowners may find their fixed rates at the higher end of what is available in the market.

Exercise caution when selecting the best fixed rate for HDB as when the fixed rate term ends, the loan often reverts to a much higher floating rate which means homeowners would then need to incur high costs to refinance out should repricing terms not be favourable.  All such transaction costs would erode the potential savings of signing for a fixed rate home loan in the first place.  The best situation to go into a fixed rate is when the longer-term floating rate is still fairly attractive, or when there are plans to sell off the HDB at the end of the 2 or 3-year fixed term.

At the prevailing floating rate of 1.88%, for every $100,000 of outstanding loan, the monthly instalment works out to $418.04 on a tenure of 25 years. So for a typical HDB home loan of $350,000, monthly instalment will come to $1,463.

1-Dec-2018new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loanindia bank housing loannew purchase housing loan
Loan TypeDBS Fixed RateOCBC Fixed RateUOB Fixed RateHSBC Fixed RateMAYBANK FixedHONG LEONG FINANCESTATE BANK INDIA FixedCITIBANK Fixed
Loan PegFHR8 = 0.50%MBR = 1.55%1M SIBOR1M SIBORSRFR2 = 4.50%BOARD = 4.65%BOARD = 6.00%1M SIBOR
2-Year FixedY1: 2.38% (Fixed)Y1: 2.58% (Fixed)Y1: 2.48% (Fixed)Y1: 2.55% (Fixed)Y1: 2.48% (Fixed)Y1: 1.88% (Fixed)Y1: 2.15% (Fixed)Y1: 2.28% (Fixed)
Y2: 2.38% (Fixed)Y2: 2.58% (Fixed)Y2: 2.48% (Fixed)Y2: 2.55% (Fixed)Y2: 2.48% (Fixed)Y1: 1.88% (Fixed)Y2: 2.15% (Fixed)Y2: 2.28% (Fixed)
3-Year FixedY1: 2.68% (Fixed)nilY1: 2.68% (Fixed)Y1: 2.70% (Fixed)nilY1: 2.00% (Fixed)nilY1: 2.48% (Fixed)
Y2: 2.68% (Fixed)nilY2: 2.68% (Fixed)Y2: 2.70% (Fixed)nilY1: 2.10% (Fixed)nilY2: 2.48% (Fixed)
Y3: 2.68% (Fixed)nilY3: 2.68% (Fixed)Y3: 2.70% (Fixed)nilY1: 2.60% (Fixed)nilY3: 2.48% (Fixed)
Lock-In Period2/3 years2 years2/3 years2/3 years2 years2/3 years2/3 years2/3 years
Partial Redemption Penalty1.50%1.50%1.50%1.50%1.50%1.50%1.50%1.50%
Full Redemption Penalty1.50%1.50%1.50%1.50%1.50%1.50%1.50%1.50%
Legal Subsidy/RebateYesYes0.40% of loanYes0.40% of loanNil0.40% of loan0.20% of loan
Subsidy Cap At$2,000$1,800$1,800$1,000$2,000Nil$1,000$2,500
Min. Loan (for subsidy)$500,000$300,000$80,000$200,000$100,000$100,000$250,000$100,000
new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loan

Compare All Latest Rates 2018

 

I. Overview Of All Best Home Loans Across The Board

To summarize all the best home loan rates and data points we have presented so far, below is an overview for what one may consider when seeking a new purchase home loan or refinancing this month.

25-Nov-2018Best Fixed Rate Home Loans

 

Best Floating Rate Home Loans
(on FDR/BOARD)
Private Property (Completed)

 

 

2.10% -2.30%BOC, SBI, MAYBANK1.88% – 2.08%DBS, UOB, OCBC, SCB
Private Property (BUC)

 

 

NANil1.90% – 1.95%SCB, DBS, UOB, OCBC, MAYBANK
HDB (Resale)

 

 

 

1.88% – 2.30%BOC, SBI, MAYBANK1.88% – 2.08%DBS, UOB, OCBC, SCB

 

 

 

We have provided a brief summary of the best home loans in Singapore in the month of November 2018.

We hope this would be useful for your comparison as we try to present the most salient information (rates, lock-in, legal subsidy, etc) of each home loan package neatly in a table form.  However, do note that as rates are dynamic in nature, we are unable to re-generate this table on a daily basis and the best way to access the most up-to-date information is still to use our interactive Rates Display below and to speak to us today for an obligation-free chat!  We can even run the numbers to show you how much is your potential interest savings when you refinance through us, and enjoy our special rewards like a $200 Refinancing Valuation Fee Offset, or a special Purchase Legal Fee of $1,800 all-in (including stamp duty, gst).

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Choosing the Right Mortgage Loan Peg

In recent months, some banks have stopped offering home loans based on fixed deposit rate and re-introduced BOARD rates for their home loan packages.

In this article we will take a closer look at the different types of mortgage loan pegs available in the Singapore market and how one is preferred over others at different periods of interest rate cycles.

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What Is A BOARD Rate?

This is probably the oldest form of mortgage pricing widely practised all over the world where the bank pegs the home loan interest rate to a pre-defined lending benchmark called BOARD rate.  Banks normally have different BOARD rates for different purposes like commercial property loans, private property loans, HDB loans, etc.  Different banks also call it by different acronyms from MR (mortgage rate), MRP (mortgage rate plus), SRFR (Singapore Residential Financing Rate) to EFR (enterprise financing rate) for commercial loans.  No matter which name it goes by, the nature of BOARD rate remains – it is determined solely by the bank in accordance with general market interest rate movements.  The actual interest charged to homeowners would usually be BOARD rate less a discount factor, or more recently, it has become BOARD rate plus a margin.

The biggest problem with BOARD rate is that it is difficult to track as it is an internal rate determined by the bank from time to time and this information is not published anywhere publicly.

 

Why SIBOR Was Used To Price Mortgages?

To understand why this lack of transparency is an issue with BOARD rates, we need to revisit the history of how SIBOR (Singapore Interbank Offer Rate) became widely used as a mortgage loan peg from 2007.

SIBOR 30-year pattern

 

Back in mid-2000s when US Fed started its last tightening cycle, homeowners in Singapore were paying skyrocketing interest rates as high as 4-5%. These were variable packages on BOARD rates which was the only mortgage loan peg available in the market back then. One can imagine fixed rates would be even higher in those days.  As banks raised their BOARD rates, there was much unhappiness amongst borrowers and complaints which eventually led banks to seek out a more transparent loan peg to be used for mortgage pricing.  SIBOR or interbank lending rates, administered by the Association of Banks in Singapore (ABS), were used to price mortgages for the first time in 2007.  ABS would calculate and publish on its website the SIBOR rates for 1-month, 3-month, and so on based on the bid and offer quotes from 20 participating banks in the interbank market daily at 11.30 a.m.

Lenders could then price their mortgage loan packages based on the published SIBOR rates by adding a spread or margin.  SIBOR would become the most transparent (published daily) and neutral mortgage loan peg as no one bank could unilaterally increase its value.  Homeowners could also compare mortgage loan packages from the various banks based on the lowest spreads quoted.  Monthly repayments would be calculated or “reset” on a rate-setting date every 1-month, 3-month or even 12-month depending on the SIBOR tenure to which the mortgage loan is pegged to. The monthly repayments would stay the same until the next reset date.

Indeed, SIBOR-pegged home loans became popular and the pre-dominant choice amongst homeowners especially in the next decade when interbank interest stayed low for long periods.

Compare All Latest Rates 2018

 

FDR Mortgage Loan Peg – An Innovation In Singapore’s Market

However, when SIBOR started rising in late 2014 after oil price collapse and the end of loose monetary regime in the US, things start to change.  By this time, DBS pioneered a new category of mortgage loan pegs called FHR (Fixed Deposit Home Rate) where it pegs home loan interest to its pre-designated Sing dollar fixed deposit rates of various tenures from 12, 24, 18, 9 to the current 8-month.  This is likely a first-of-its-kind in the world for mortgages.  The market took to it by storm aided by the perception of meagre fixed deposit rates in Singapore, meaning mortgage loan interest pegged to FHR would likely stay low. Before long, other banks also launched their own versions of such mortgages based on fixed deposit rates, which we now refer to collectively in this blog as FDR (fixed deposit rate) home loans, and FDR took over SIBOR as the preferred mortgage loan peg in the last few years.

As interest cycle heads further north with US Fed now on track for 4 hikes this year after it last raised the federal funds rate in September, SIBOR being an interbank rate would always be the first to respond to any drying up of liquidity in the banking system.  On the other hand, as banks need to justify any increases to FDR loan pegs, there is usually a lag time before they play catchup with SIBOR.  So far this year, we have observed this lag to be generally around 3 to 6 months.  This re-affirmed our view that in an interest rate upswing cycle, FDR will be preferred over SIBOR due to this laggard nature – SIBOR would need to move first and quite significantly.

What is more uncertain is the choice of BOARD rate which is essentially like a “black box” where we are unable to track its exact movements over time.  Will banks exploit this lack of transparency to increase BOARD rate more often than necessary, or to increase even more than the run-up in SIBOR?  We can only hope that history does not repeat itself.

 

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest developments in the industry, providing useful mortgage tips, and making sense of rate movements.  We seek to build trust with clients over the longer term instead of doing product-peddling for quick one-time deals.  That’s why we always present “whole-of-market” perspective including home loan packages that some banks do not pay us.  Read our clients’ testimonials.

 

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1-Month SIBOR Hits Fresh High Of 1.63

Following the latest US Congress mid-term elections, 1-month SIBOR has hit a new high of 1.63433 this week (as at 7 Nov).  This is a run-up from its last trading level at 1.50 range-bound since July and all eyes will be watching will it fall back or move even higher from here.  3-month SIBOR has also risen in tandem to 1.75833.

Compare All Latest Rates 2018

 

Of course, the pressure on interest rates has been building for a while and this is not a direct outcome of the US mid-term result which we know by now has led to a gridlock in Washington with a Democrats-controlled House of Representatives and a Republican-majority Senate.  Implications of that is topic for another article but suffice to say much of Trump’s agenda has been pushed through and in fact the next upcoming item in 2019 concerns fiscal infrastructural spending which is bipartisan agenda supported by both parties.  Much of the economical momemtum will be sustained through 2019 with trade sanctions the only spanner in the works.

 

Back to interest rate trajectory.  As we have said many times in this blog, banks are privy to ongoing trends in the money market.  Wih SIBOR rising to all-time high, it is no wonder we have seen quite a few rate movements by lenders over the past month:

 

1. StanChart Increased FDR Tranches Across-The-Board (8 Nov)

This has been announced by StanChart back in early October as the bank is required to give a one-month notice to all its home loan customers.  Affected StanChart customers would have received the notification letters by now.  The increases are as follows:

 

FDR Tranches

 

Old ValueNew ValueIncrease ByEffective Date
48FDR0.90%1.10%0.20%8 Nov 2018
9FDR

 

0.30%0.65%0.35%8 Nov 2018
36FDR

 

0.72%0.97%0.25%8 Nov 2018

 

Most of MortgageWise customers to whom we recommended StanChart’s floating rate packages (the 1% loan) back in 2016 were on 48FDR and would have enjoyed almost two years of super-low average mortgage interest which is just beginning to shoot above 2%.  Now may be the best time to review especially for those out of lock-ins.  Contact your consultant.

 

To be fair, this year all banks have raised their FDR (fixed deposit rate home loans) pegs, in fact some by more than once, as the benchmark 3-month SIBOR has risen from 1.00% at the start of the year to 1.63% now.  The increases so far averages 0.30% each round which is palatable vindicating our view on FDR as a more stable mortgage peg than SIBOR.  The intensity of increases going forward will depend on how fast SIBOR comes up.

Compare All Latest Rates 2018

 

2. DBS Announced BOARD Rate Increase For Commercial Property Loans

DBS just announced hiking of its EFR (Enterprise Financing Rate) for commercial property loans from 6.00% to 6.50% come 3 December.  Being the “national” bank and likely market leader for commercial property financing as well, this means a large number of commercial office and shophouse owners in Singapore will start to feel the pinch of rising cost of borrowings going into 2019.

 

Commercial property interest rates behave quite differently from residential rates in that they are priced at much higher levels and each hike is usually in the region of 0.50% at the least.  Businesses will start to see their interest rising to above 2.50%-3.00% soon, if not already, should the current trend continues unabated.  In fact, we were surprised to see this increase in EFR coming this late part of the year which is kudos to DBS being supportive of local enterprises.

 

Speak to our team of mortgage consultants who are equally adept in both residental and commercial property loans under personal or company names.

 

3. Local Banks Raised Fixed Rates Above 2.28%

Since beginning of this month, all three local banks have raised their fixed rate for home loans to new highs of 2.28% to 2.48%.  In fact, it has been an unsual few months for us in this business where we have not seen local banks competing so badly on fixed rates with their foreign counterparts.  Quite a few foreign banks the likes of HSBC, Bank Of China (BOC), Maybank and even State Bank Of India have been quoting much more competitive fixed rate packages this year and stepping up their promotional drives especially in the last few months.  We wonder why.

 

It seems this can only be explained by the tight liquidity going on in the interbank market where the three local banks, being net lenders, now feel the effect of rising cost of funds more acutely and hence are on deposits acquisition drive.  Incidentally they would also benefit in a big way from lending out at higher interbank rates which is reflected in their latest quarterly financial results.

Compare All Latest Rates 2018

 

 

4. There Is No More Sub-2% Fixed Rate

With Bank Of China just announcing their new higher rates with effect from tomorrow (9 Nov), there is no more fixed rate home loans for private properties at below 2% as of now.  The new 2-year fixed rates for BOC has risen from 1.95% to 2.10%, and 3-year fixed rates from 1.95%, 2%, 2% to 2.25% for all 3 years.

 

This is a scenario we have forewarned since a few months ago when we make the call for homeowners to take early action and lock down fixed rates before they move past 2%.  It will be interesting to watch now how the market adjusts to this new psychological high of over 2% lending rates.  Indeed, it is unchartered territory for many who are so used to mortgage rates languishing in the 1.30% to 1.80% over the past 10 years.

 

Speak to us today quickly to explore what is the best option for refinancing going into 2019 where structuring of loans to achieve a lower blended rate or offset rate becomes more important.

 

 

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest developments in the industry, providing useful mortgage tips, and making sense of rate movements.  We seek to build trust with clients over the longer term instead of doing product-peddling for quick one-time deals.  That’s why we always present “whole-of-market” perspective including home loan packages that some banks do not pay us.  Read our clients’ testimonials.

 

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5 Surefire Ways To Reduce Housing Loan Interest

As interest rate continues to run up unabated, it is timely to do a review on your housing loan and in this article we will look at 5 surefire ways you could reduce your borrowing costs.

Compare All Latest Rates 2018

 

1. Lock Down Fixed Rate Today

In this blog, we have been warning of rising home loan fixed rates since two months ago.  And as local banks announced raising their fixed rates further in November to 2.28% (2-year fixed), and HSBC ending their current fixed rate promotion (one of lowest) this week, we are drawing near to the scenario we predicted a while back – there will be no more sub-2% fixed rates in the market soon.  The last remaining banks to offer fixed rates of below 2% for housing loan are Hong Leong Finance (1.88%) for hdb property and Bank Of China (1.95%) for private properties of loan above $500,000.  Every one else is above 2% now with the withdrawal of HSBC fixed rate packages this week.

 

If US Fed follows through with one more rate hike in December and three more forecasted for 2019, there seems to be no reprieve in sight yet for homeowners, not until when the fed funds rate itches closer to its longer-term neutral rate of 3% by end of 2019.

 

For those with lock-in ending within the next 6 months (by April 2019), quickly contact us to lock down a fixed rate housing loan package now when it is still at the 2% range.  Yes, unknown to many, we can do that as early as 6 months before with some minor trade-offs in the period of fixed rate term one will enjoy.  Our experienced team of mortgage consultants will explain how it works.  As I put to you that if fed fund rate rises to just 2.50% (if we reduce the forecasted number of hikes going into 2019 due to trade war and undue influence from the White House), 3-month SIBOR here in Singapore is not going to stay at the current levels of 1.64%.  See our correlation chart.  This means that fixed rates for housing loan would most likely rise up by approximately another 50 basis points from where we are today.

 

2. Reduce The Tenure

This is certainly going against what most bankers and mortgage consultants would preach.  Before we explain this point, let us give one caveat – when this is a 1st loan on a property at the point of purchase, there is some merit in the argument to go for a longer tenure as in subsequent refinancing, certain banks may not allow one to increase the no of years from the original tenure of the loan.  Of course, reducing it is of no concern to any bank as long as one could still meet TDSR (total debt servicing ratio) with a higher monthly repayment that comes with a reduced tenure.

 

For those who has no concern on cashflow to service a higher repayment every month, and especially for owner-occupied homes where there is no monthly rental to defray interest costs, the best way to reduce interest costs is to shorten the tenure.

 

Most homeowners focus on reducing the interest rate per se during refinancing, but forgot to look a closer look at tenure as a lever to cut interests.  There are two drivers behind how much of the mortgage repayment you pay every month goes to interests and how much of it goes to reducing the principal loan.  Ceteris paribus, know this:

 

“The higher the interest rate, the bigger is the interest-component in the monthly repayment and less goes to reducing the loan;

AND

The longer the tenure of the loan, the bigger is the interest-component in the monthly repayment and less goes to reducing the loan.”

 

We have illustrated this point clearly with a case study in another article which you may want to read here.

Compare All Latest Rates 2018

 

3. Do Partial Repayment – Immediate And During The Lock-In Period

To pay down partially on the outstanding loan when one refinances is an obvious way to reduce interest costs.  The art is in deciding how much to pay down and how much to stash away as emergency funds or funds you could deploy quickly when opportunity arises like during a market crash etc.

 

Perhaps one good way is to do a combo loan – many in the market are still unaware of this option, which is available today via three banks.  Simply set a target how much one likes to pay down within the next two to three years.  For example, on a $700,000 housing loan, one may reason that with expected bonuses at year-ends and excess funds accumulating in the CPF Ordinary Account (OA) balance, there is a very high chance of paying down a further $100,000 over the next two years.  Simply take $100,000 in a floating rate housing loan with no lock-in or one that allows partial redemption, and the remaining bulk of $600,000 follow what we advocate in our first point – lock down with the lowest fixed rate housing loan as there is no intention to pay down on that portion.

 

Incidentally, one noteworthy point here – whenever cash flow is not a concern, one should always service the housing loan in cash instead of from CPF.  Until such time mortgage interest rate rises above the CPF OA interest of 2.50%, unlock the CPF funds to reduce the outstanding loan.  Why?  Think of it this way, if CPF Board wants to work hard to achieve a risk-free (to you) return of 2.50% p.a. by investing your money, let them do it.  If one uses his CPF funds to service the home loan instead, not only does he deprive himself of this guaranteed return, he has to make that 2.50% return per annum himself to pay back to his CPF as accrued interest when he sells the property later.  Tough.  Unless of course one is a professional fund manager by training and achieves a much higher annualised rate of return above 2.50%, then by all means service the mortgage from CPF and deploy his cashflow for investment.  But how many of us can do that consistently?

 

4. De-couple At The Same Time When One Refinances (And Buy A 2nd Property?)

This recommendation helps not only reduce interest costs in the long run, but one’s overall transaction costs for those planning to buy a second property for investment.  But it certainly carries some risk.  So, caveat emptor!

 

With new cooling measures announced on 6 July 2018, ABSD (additional buyer’s stamp duty) has gone up to 12% on a second property even for a citizen.  We have predicted that the trend for couples to “de-couple title” on their first private property will continue and become even more popular.  As de-coupling of property title involves significantly higher legal fees (market rate $5,000-$6,000), the best time to do it is during a refinancing exercise where there are banks who may still provide partial legal subsidy (most banks do not offer subsidy when there is a purchase component like in de-coupling).  Speak to our consultants who can advise you on this.

Compare All Latest Rates 2018

 

How can de-coupling then saves money when one has to spend more on transaction costs and put down more money for downpayment of a second property?  This requires taking a longer-term perspective.  First, a couple who are both citizens would save on paying 12% ABSD when the outgoing spouse (for example the wife) buys a property in her own name.  Next, although collectively they now take on more loan with the husband assuming the full loan on the first property, and the wife taking out a new purchase loan on a second investment property, the difference is – there is now rental income to help pay for interest costs on both housing loans.  We will illustrate this with one quick example below:

buying investment property

Total interest on both properties in 1st month = $1,250 + $833 = $2,083 is less than rental $2,500

 

The total interest costs is now paid for completely by the tenant.  This is of course an over-simplied example as we are putting in quite a number of assumptions:

 

  • The Tans have the funds for downpayment of for the 2nd property
  • Both husband and wife have much higher income now to qualify for a bigger loan on their own and they have the cashflow to meet a higher combined monthly repayment of $6,323 (additional $2,529 more every month due to the new purchase loan)
  • The investment property is highly-lettable with no or minimal vacancy periods between leases
  • There is minimal unexpected “holding costs” they will incur which erodes the yield for example repairs, contributon to sinking funds, etc.

 

(Note: In this example we are ignoring the usual transactions costs like normal 3% buyer’s stamp duty, agent’s commission, legal fees, etc. as we are not calculating net investment yield.  We are not getting into discussion on capital gains from asset appreciation over time hence we ignore the return of investment for deploying funds toward downpayment of 2nd property)

 

For this strategy to work, the key is the ability to achieve consistent rental income and for mortgage interest not to skyrocket so high like above 5% for long periods which then means they will need to “top up” and pay interests as the rent per se will not be sufficient to cover the interest-portion completely.  Having the  cashflow to sustain through such high-interest periods, if it happens, will be vital failing which they will need to dispose of the asset sometimes at a loss.

 

Still, you get the idea behind this – we always advocate property investment as a form of disciplined savings where the tenants help to pay for the property over the course of the loan.  Over the long term, investment property may be the best way to reduce interest costs as someone else helps to pay for it.

 

Incidentally, there are ways to get more loan from the banks based on assets including stocks and bonds instead of just income earned.  Speak to our consultants who can calculate the maximum loan for a new purchase loan or AIP (approval in principle) for you or your spouse.

 

5. Work With A Trusted Mortgage Consultant

Buying a second property for rental income may not work for everyone.  Seeking out a trusted professional mortgage consultant whom one could work with long term is what every homeowner could do and should.

 

Not only does having a personal mortgage broker saves one time in doing home loan comparison, it actually saves money when there are timely reminder calls to review the mortgage ahead of lock-in expiry date.  A good mortgage consultant would also be able to track developments in the industry including interest rate hikes by the various banks over time to aid clients in making the most informed decision, not to mention navigating the ever-changing regulatory framework on home loans.

 

 

We hope the fire ways outlined in this article will benefit you in saving real money, or at the very least let you see mortgage planning and management in a new light.  Contact us now to start saving on interest costs from today!

 

 

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest developments in the industry, providing useful mortgage tips, and making sense of rate movements.  We seek to build trust with clients over the longer term instead of doing product-peddling for quick one-time deals.  That’s why we always present “whole-of-market” perspective including home loan packages that some banks do not pay us.  Read our clients’ testimonials.

 

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Real Estate Australia – Financing From Singapore Banks

Many foreigners who bought into off-the-plan Australian real estate for investment, especially during the mad rush before the stamp duty surcharge hike for foreign buyers of residential properties (for example from 3% to 7% in the state of Victoria with effect from 1 July 2016), were caught in a limbo now that their settlement date draws near.  This wave of completions for newly-launched residential real estate projects in Melbourne back in 1st half of 2016 (new 7% stamp duty surcharge for foreign buyers were announced in April 2016 by Victorian State government) will be mostly in the period of 2018/2019.

Compare All Latest Rates 2018

The limbo was caused by the clampdowns on lending to foreigners since 2017.  Those who opted not to take up financing immediately at point of purchase and are now looking to secure mortgage loans from Australian banks get a shock when they find themselves unable to secure the financing required.  As such, those without sufficient cash on hand to settle or complete their purchases may end up giving up their units and back to the developer.  We have heard of such cases.

Not all is lost as unknown to many, there are banks in Singapore that could extend financing for Australian investment properties, especially for those in prime areas (usually within 20km from CBD) of the four major Australian cities of Sydney, Melbourne, Perth, and to a lesser extent Brisbane.

 

Who Are Eligible For Such Australian Property Loans From Singapore Banks?

Quite a large number of foreigners are eligible even for PRC buyers of Australia real estate for investment albeit qualification may be more stringent for this group unless one works for a MNC operating in China, with verifiable income documents.  Still, the overarching criteria here is – as long one is not residing within Australia, ie. working or paying tax in Australia, Singapore banks would be able to lend to any nationality even Australian nationals working here in Singapore.  The qualification will be easier if the real estate investor is based in a country where there are branch operations of the Singapore bank, but this may not be necessary.

Though many foreigners are eligible to apply to Singapore banks, take note not all locations and projects can be financed and our consultants do need to check with the banks from time to time who may exclude certain projects based on location, property class type, and concentration risk for the lender (so the earlier you apply, the better).

Compare All Latest Rates 2018

 

How Much Financing Can I Get And Is The Process Onerous?

In most cases, expect the loan-to-value (LVR) for foreigners borrowing from Singapore banks for their Australian investment real estate to be 60%.  Those working in Singapore could usually get slightly higher LVR up to 70% of the valuation.

The application process is a lot easier than what most thought.  It is certainly a lot less cumbersome than trying to borrow from an Australian bank downunder, especially for foreigners that is now made quite  impossible unless one has prior wealth relationships with the lender.  For employment income, Singapore banks would mostly require just 6 months of payslips with 6 months of bank statements showing matching salary-crediting.  Tax documents from recognized tax regimes like Hong Kong etc would be a bonus.

Most importantly, the entire approval process would usually take less than 2 weeks compared with sometimes over a month or two for lenders from other countries, as Singapore banks are generally familiar with taking in Australian real estate collaterals.

 

Any Other Criteria That I Need To Know?

Some banks (not all) would require AUM or asset under management, which typically means depositing S$200,000 into a Wealth or Premier banking account before the mortgage can be approved or disbursed.  Speak to our consultants who could better aid you in understanding this requirement.  In some instance, this could be waived.

Though this might deter some investors who value liquidity, it could actually play to their advantage especially for those who like to take a position in the currency pair of AUD/SGD where some Singapore banks would even allow switching (for a small admin fee) from one currency to another when investors choose to take a bet on currency movements.  And when the currency position is in Sing dollar for example, the AUM funds of S$200,000 would come in nicely as a buffer should there be a need to “top up” or pay down on the loan if the bet goes wrong.  This is so as the AUM funds has already been converted at an earlier exchange rate before the bet.

Most importantly, as history has shown, the Sing dollar remains a safe haven currency in this part of the world as Singapore continues to gain status as the financial hub of South Asia, especially for the growing segment of crazy rich Asians.  For global real estate investors, it certainly makes financial sense to diversify and park some of their funds here in Sing dollar base.

Compare All Latest Rates 2018

 

RBA (Reserve Bank Of Australia) has held its cash rate or the benchmark overnight interest unchanged at 1.50% for almost 2 whole years since mid of 2016.  The Board has voted to maintain this same rate in its most recent meeting on 2 Oct with softening home prices in both Sydney and Melbourne and the tightening lending conditions weighing in the minds of monetary policy makers.

 

Singapore banks providing financing for real estate investment in Australia usually peg their loans in AUD to their internal cost of funds (COF) for 3-month AUD, which tracks the cash rate in Australia closely.  In fact, if one opts to take the loan in SGD instead, the prevailing interest rates would actually be a lot lower than those in Australia which hovers around 5-6%.  The SGD financing interest from Singare banks is at around 4% and we could even get you rates below 4% for the first two years of the loan.

 

With such low interest rates supporting the real estate market in Australia, and developers downunder having to price-right in a softening market, this could be the best time to pick out the winners for Australia real estate.  And there is no better way to leverage than from Singapore banks.  Contact our team of professional mortgage brokers based here in Singapore and let us make this process a walk in the park for you.

 

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest developments in the industry, providing useful mortgage tips, and making sense of rate movements.  We seek to build trust with clients over the longer term instead of doing product-peddling for quick one-time deals.  That’s why we always present “whole-of-market” perspective including home loan packages that some banks do not pay us.  Read our clients’ testimonials.

 

Compare All Latest Rates 2018

 

 

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Free Conversion

It is not uncommon to hear the term “free conversion” bandied around these days when comparing various mortgage packages out there when refinancing home loans in Singapore.  Most of the major lenders learnt to bundle this in as part of their home loan offerings in a bid to attract new sign-ups.

Compare All Latest Rates 2018

 

What Is A Free Conversion?

A free conversion simply means that the bank allows you to reprice to another prevailing home loan package without slapping the usual repricing admin fee which can range from $300 to $1,000.  Banks being profit-driven will use every opportunity to make more fee income from existing clients.  Compare this with refinancing to another lender who might be more hungry for your business and instead of charging you a fee, they would offer to pay the costs of moving your business over by way of a legal fee subsidy or cash rebate.  For this reason, it will be unwise for anyone to simply reprice without first taking a look at what else is available in the market.

Incidentally the good news is made even sweeter now when you decide to refinance through MortgageWise.  This is because we throw in a $250 Tangs voucher (subject to a minimum loan of $500,000), which effectively covers most of your valuation fees as well, which means your entire refinancing exercise can be done at absolutely zero cost! (terms apply).

As a standard practice, almost all banks would give one free conversion upon T.O.P. for BUC (building under construction) home loans when buyers purchase a new launch project.  What this means is that buyers who bought new projects could ask to reprice or convert their loan from a BUC floating rate home loan to say a fixed rate home loan on completion of the property.  Typically, banks would specify a period of time where this free conversion would be valid for, like within 3 or 6 months of T.O.P.

However, when it comes to refinancing of a completed or resale property, this free conversion option is not a given.  Most banks would not offer this feature as it means they will not be able to earn a recurring fee income.  Still, more and more so, banks are recognising the importance of offering a free conversion and is cleverly weaving it into their home loan product for differentiation.  Some would give a free conversion during the lock-in period of the loan should the bank raise the mortgage base rate or the mortgage peg; others might throw in a free conversion at the end of a fixed rate term.  All these are done with the objective of making the home loan package more attractive to a prospective homeowner who is considering a refinancing move.

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How Useful Is Free Conversion?

How does free conversion enhance the appeal of a home loan package for refinancing?  One key factor here is it helps to remove the fear of being tied down to a bank which keeps adjusting rates upwards during the lock-in period. This is applicable to those on a floating or variable rate home loan.  Nowadays all home loans come with a two-year lock-in period even for floating rate home loans.  Banks who offer this feature is giving customers a sort of safety net that in event the bank has to raise the benchmark mortgage peg, the customer has a choice to opt out to another new package within the bank which would be of lower interest rate (typically packages for new sign-ups customers would be lower rate than existing customers).  The free conversion also act as some kind of psychological restraint put on lenders who needs to think twice before deciding on an increase, knowing that any miscalculated move would result in massive conversions from one package to another of lower margins.

One caveat we need to give though – free conversion during a lock-in period is only as good as the repricing packages offered by the bank.  We know some banks may not necessarily offer repricing clients the same rate as what they give to new clients, especially when they know these clients are still within their lock-in periods and would be unable to move out without incurring a penalty.  Still, it makes no sense for the repricing bank to offer a package that is of a higher rate than the new revised interest rate that the repricing client has to pay.

For those on fixed rate home loans, free conversion is normally given at the end of the fixed term. Here, a free conversion feature is highly meaningful especially for those who opt for a two-year fixed rate home loan instead of a three-year fixed.  This is because refinancing clients would need to stay for a minimum of three years to avoid a clawback on legal fee subsidy, which means they would need to reprice and stay for at least one more year when their two-year fixed term expires.  The free conversion feature which is written into the letter of offer ensures that homeowners would not be at the mercy of lenders who could call the shots when slapping on admin fees as high as $1,000.  They would have to reprice free of charge as contracted.  And remember when the two-year fixed term ends, so is the lock-in.  So lenders would need to offer an attractive repricing package as well lest the customer refinance out (yes, even paying back the legal subsidy of $2,000 may still make sense if the repricing offer is so inferior).

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Which Are The Loans Out With Free Conversion?

For floating rate home loans, both UOB and OCBC offers a free conversion during the lock-in period should the bank increase the underlying mortgage peg – the BOARD rate.  For fixed rate mortgage packages, HSBC stands out with its superior two-year fixed rate home loan at 1.90% and three-year fixed rate home loans at 2% (both for minimum loan of $800,000) where the bank offers a free conversion at the end of the fixed term.  Incidentally, these two packages are some of the last few sub-2% fixed rate for refinancing home loans in Singapore (see our article last week), which we forecast will come to an end very soon.

 

So for those with existing home loans where the lock-in expires within the next 6 months, now is the best time to take action. Speak to our consultants to find out how you can secure quickly one of these sub-2% fixed rate home loan for refinancing, along with our Zero-Cost refinancing option.  It’s a no-brainer.

 

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest developments in the industry, providing useful mortgage tips, and making sense of rate movements.  We seek to build trust with clients over the longer term instead of doing product-peddling for quick one-time deals.  That’s why we always present “whole-of-market” perspective including home loan packages that some banks do not pay us.  Read our clients’ testimonials.

 

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The Last Of Sub-2% Fixed Rates

With UOB ending its direct-to-bank 2-year fixed rate home loan promotion of 1.98% on its website this week, the number of such fixed rate home loan packages at below 2% in Singapore has dwindled to just four.  All 3 local banks have set their fixed rate home loan at 2.18% for 2-year fixed and at 2.38% for 3-year fixed rate.

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In fact, this month October may be the last month for any homeowner still keen to lock down fixed rate at below the psychologically-important 2% mark.  This is so as US 10-year Treasury yields has shot up to above 3.2% this week, a decade high, and recent hawkish comments from the Fed Chair buttress the case for more aggressive rate hikes if needed going into 2019.  Last check 3-month SIBOR in Singapore is still hovering around 1.64% but not for too much longer with the pressure on the dollar.  Here at MortgageWise, we maintained our view that the benchmark interest rate of 3-month SIBOR will continue on its march towards 2% target before the end of the year.

 

Here’s a quick look at the last of 4 remaining banks with fixed rate home loans still at below 2%:

fixed rate home loan singapore

fixed rate home loan singapore

 

If indeed our prediction comes true by end of this month, this will be the first time in a long while that we see almost all fixed interest rates going above 2% in Singapore.  This is a very likely scenario considering CIMB may finish its tranche of funds soon which it will then end its 3-year fixed rate home loan promotion which is attractive now at average of 1.90% over 3-year period for minimum loan amount of $800,000.

 

Homeowners whose lockin expires before March 2019 will do well to act early by contacting us now.  This could be the final chance to lock down sub-2% fixed rate for the next 3 years which will give absolute peace of mind when rates start to go on a tightening path.  Speak to us today as not only do you enjoy the last of such low fixed rates, those refinancing with a minimum loan of $500,000 would receive $250 Tangs voucher from us to help defray their valuation fees, in our zero-cost refinancing promotion.  Not to be missed!

 

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest developments in the industry, providing useful mortgage tips, and making sense of rate movements.  We seek to build trust with clients over the longer term instead of doing product-peddling for quick one-time deals.  That’s why we always present “whole-of-market” perspective including home loan packages that some banks do not pay us.  Read our clients’ testimonials.

 

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Fed Stays On Course For 4 Hikes This Year

As widely expected, US Fed concluded its September FOMC with a rate hike decision – third rate hike this year that brings the federal funds rate past 2% to a range of 2.00-2.25%.

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The Fed has also for the first time removed the word “accommodative” from its policy statement which some traders interpret as the end of the its rate hike cycle that started in 2015 which has seen it moved up the rate 8 times since.  However, Fed chair Jermone Powell clarified that although monetary policy is no longer accommodative, it will proceed inline with expectations and the Fed maintains one more rate hike in December, three more next year in 2019 and, in a vote of confidence in the US economy, signaled it sees three more years of economic growth.

 

Here are some key highlights of September FOMC statement:

  • Housing spending and business fixed investment registered strong growth
  • The committee forecast the funds rate to hit 2.4% by end of 2018, 3.1% by end of 2019, and 3.4% by end of 2020
  • GDP grew by at the fastest rate of 4.2% in 2ndquarter
  • Amidst strong job gains, unemployment rate will fall further from 3.9% to 3.7% by end of 2018
  • Wage growth also hit a high of 2.9% in the month of August
  • Core inflation will hold at Fed’s targeted 2% this year and is expected to rise up only very gradually

 

With the removal of the accommodative stance by Fed in this FOMC, some believe US Fed will now slow down its pace of rate hikes especially when inflation continue to remain low.  However this does not seem to be so going by how Fed is maintaining one more rate hike in Dec and three more in 2019.  However, the committee has made clear its forecast does not factor in any fallout from the current trade spat from the Trump administration.

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Here in Singapore, we also stay on track with our forecast that SIBOR would cross 2% by end of the year.  We think the pace of rate hikes might slow when US Fed hit the long-term neutral rate of 3% by end of 2019.  With rising rates in US, lenders in Singapore especially local banks have been revising their base mortgage lending rates over the past months. The pressure is also on for banks to revise their fixed rates after this month and we may finalize see the last of sub-2% fixed rates as the last few remaining foreign lenders up their rates (the likes of Bank Of China, CIMB, etc).  Already local banks have announced 3-year fixed rate going up to 2.38% with effect from October.

For those keen to refinance or with lock-in expiry within the next 6 months, there is no better time to speak to us than now, as we also offer a zero-cost refinancing solution to our clients (for loan above $500,000).  You will have nothing to lose, not even a repricing admin fee to pay, when you choose to refinance through MortgageWise today!

 

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest developments in the industry, providing useful mortgage tips, and making sense of rate movements.  We seek to build trust with clients over the longer term instead of doing product-peddling for quick one-time deals.  That’s why we always present “whole-of-market” perspective including home loan packages that some banks do not pay us.  Read our clients’ testimonials.

 

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The Perils Of Lock-In

Everyone is familiar with the concept of a lock-in or a contractual period with the most ubiquitous being that of a mobile phone plan’s 2-year recontract period whenever one upgrades his or her iphone in Singapore.  The penalty for breaking such a mobile phone contract is to pay back the telco a certain amount of subsidy given on the new iphone sold to you earlier at a “subsidized” or promotional price.

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When it comes to home loans, this penalty amount to be paid back if one breaks his mortgage contract is not merely a few hundred dollars but huge – at 1.5% of the outstanding loan!  Take a typical loan for a private property in Singapore at $700,000, this means paying back $10.500!  Surely a showstopper for anyone thinking of refinancing out to another bank to save on interest costs.

It is hence interesting that we observe in the past few years that most homeowners in Singpoare are not too particular about lock-in periods that is tied to most home loan packages today (usually 2 years sometimes longer).  Most would gladly sign on the dotted line for a floating rate home loan without raising an eyebrow, especially when lured by lower nominal headline rates in the first few years.

When SIBOR starts to climb more aggressively since the start of the year, and hiking of mortgage pegs by various lenders becomes more commonplace, the reality of lock-in penalty begins to bite.  Most banks have adjusted up their mortgage pegs by 0.30% to 0.60% this year, and most homeowners on floating rate packages have found their interest rate suddenly going up to above 2%, some with barely less than a year into their 2-year lock-in period.  What this means is that one would be unable to refinance out, or even negotiate with their existing bank to reprice to another lower-rate package while they are still locked in.  The lock-in means the borrower is essentially trading off his right to quit or break the contract in return for lower promotional rates.  This trade-off then has got to makes sense with a wide enough discount from prevailing floating rates if one is to sign away his rights to walk away.

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The good news is, unknown to some homeowners who simply reprice with their banks, there are actually interesting home loan features offered by a few lenders out there that mitigate the restrictions of a lock-in period.   With interest rate expected to continue on its upward trajectory, homeowners ought to look beyond interest rate per se and start exploring many other mortgage loan features available in the market place.

 

No Penalty For Partial Repayment

There are many clients we know with high balances in their CPF Ordinary account which they leave behind to earn the risk-free compounding interest of 2.5% p.a. while they use cash to service their monthly repayments.  When interest rate starts to rise up eventually above 2.5%, it would make perfect sense to deleverage and pay down part of the mortgage, be it using cash or CPF.

There are home loan packages that allow one to prepay partially up to any amount during the lock-in period, leaving behind just $200,000 outstanding loan, sometimes even leaving nothing but $10,000 balance in order to redeem the loan in full after the 2-year lock-in period so as to avoid any penalty.

 

No Penalty For Full Redemption Due To Sale Of Property

Yet there are more than a few banks now that offer full waiver of penalty when the redemption of loan is due to sale of property during the lock-in period.  And the best part – this applies even to fixed rate home loan.

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It is no longer true that if one has intention to sell his property soon, or when his condo is going through an enbloc exercise, it will be unwise for him to refinance or reprice to a fixed rate home loan to lock down runaway interest costs should he take much longer to complete the sale.  It used to be true as even repricing to another home loan package often comes with a fresh 2-year lock-in period and he will need to pay 1.5% penalty on the full loan upon completion of sale.  Now, the best thing to do is simply refinance to another bank that offers this full waiver feature due to sale of property.  That way, the worst-case scenario would be simply to refund back to the bank the legal subsidy of $1800-$2000 should he manage to sell his property in the next 3 years (legal fee clawback period).  That is a far cry from paying 1.50% penalty on the outstanding loan.

 

Free Conversion If Bank Increases The Mortgage Peg

Again, there are more than a few banks offering this feature which gives homeowners some kind of bargaining chip.  To allay fears of being “trapped” in a particular floating rate package for 2 years where the lender would then mercilessly jack up the mortgage peg couple of times in a year, banks now dangle the right to request for a free conversion anytime should the mortgage peg be raised.  This essentially means that homeowner could ask to reprice to another better prevailing package with the bank (usually they would opt for fixed rate in such a scenario) and the bank would do that free of charge without slapping the usual admin fee for repricing.  In a way, this puts a restraint on lenders who might otherwise raise interest rate with no fear of exodus of clientele base or mass switching of home loans to lower-spread packages within the bank.

 

In fact, as the gap now between the lowest floating rate home loan at 1.70% and the lowest fixed rate home loan is at 1.68-1.85%, why get locked in for 2 years on a floating rate when one could effectively eliminate all the perils of lock-in period by signing on a fixed rate?  Speak to our consultants today to find out more.

 

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest developments in the industry, providing useful mortgage tips, and making sense of rate movements.  We seek to build trust with clients over the longer term instead of doing product-peddling for quick one-time deals.  That’s why we always present “whole-of-market” perspective including home loan packages that some banks do not pay us.  Read our clients’ testimonials.

 

Compare All Latest Rates 2018

 

 

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