HSBC mortgage loan

HSBC SmartMortgage

Many would have heard of interest offset loan in Singapore when it comes to mortgages, currently offered by three banks.  However, most either do not quite understand how it works, or could yet fully appreciate the true benefits of having such a feature in their home loan. With interest rate expected to continue to head north though at a slower pace, de-leveraging becomes a key theme going forward and it is timely now to review how interest offset works and why one should consider it.

Compare All Latest Rates 2018

An interest offset mortgage loan is one where the bank provides concurrently a current account that pays the borrower back the same deposit interest rate as the mortgage rate charged, for up to a certain percentage of the amounts deposited with a cap set based on the outstanding mortgage loan at any point in time.  The interest earned on the qualifying deposit amounts every month is then used to “offset” against the interest charged on the mortgage loan hence resulting in the borrower reducing his loan more repaidly than otherwise.

We like to introduce HSBC’s SmartMortgage, with one of the highest qualifying deposits ratio of 70%, amongst the three banks with interest offset accounts in Singapore (StanChart at 67% and Citibank at 50%).

Let’s take it look at how it works by way of an example.  Assuming Mr. Tan just refinanced an outstanding loan of $700,000 to HSBC on a 25-year tenure that comes with the SmartMortgage current accout and below is a summary of the offseting effect should Mr. Tan deposit $200,000, $700,000 (equivalent amount to his loan) or even $1,000,000 into his SmartMortgage current account.

HSBC SmartMortgage interest offset loan

Notice how the interest earned on the qualifying deposits is now used to “offset’ against the interest component in the monthly repayment so that more of it goes towards reducing the principal loan.  Mr. Tan still pays the same mortgage repayment every month of $2,967.  In scenario A where there is no interest offset current account, he would be paying approximately 40% of that as interest to the bank.  In scenario B when he deposits $200,000 of his idle funds into his SmartMortgage account, he reduces this interest costs by 20% from $1,167 to $933 which has the same effect of reducing his mortgage interest rate by 20% from 2% to 1.6%.  What happens if Mr. Tan deposits the equivalent amount to his loan of $700,000 idle funds into SmartMortgage?  That would be scenario C where his interest component is further reduced to $349 which effectively means he is paying only 0.60% on his home loan.  In the last scenario D when Mr. Tan deposits $1m idle funds into SmartMortgage, his mortgage interest offset remains the same as the bank has capped the maximum offset at 70% of the outstanding loan, ie. $490,000.

Compare All Latest Rates 2018

Now one wonders why would someone with idle funds of $700,000 still need to take up a home loan of $700,000 with the bank?  That depends on one’s objective.  We will look at four key benefits of an interest offset loan with HSBC’s SmartMortgage?

1. Added Assurance When Choosing Floating Rate Over Fixed Rate Home Loan

As the gap between the lowest floating rate (currently at 2%) and the lowest fixed rate (currently at 2.48% for private properties) widens significantly in recent months, more homeowners are caught between a rock and a hard place.  On one hand, there is reluctance to sign for fixed rate at such high levels unseen in Singapore for the past decade lest one ends up with a lemon should global recession hits and rates come tumbling down; on the other hand, there is fear of runaway interest rates if left unhedged with a fixed rate home loan.

An interest offset loan becomes a very useful mitigating weapon at one’s disposal in such a situation.  When choosing a floating rate over fixed, one does not have to lose control totally even with rising interest rates as interest costs can be lowered by parking idle funds into the SmartMorgtgage account as we have seen in scenario B above (placing $200,000 deposit reduces the interest cost to $933 in the 1stinstalment which is exactly how much interest will be charged when the same loan of $700,000 is signed at 1.60%, instead of 2%)

2. Reducing Interest Costs Without Doing Actual Prepayment

Most of us will not have so much idle funds to do a scenario C where one could effectively pay down the loan in full. But many would have some kind of rainy-day funds in cash.  With rising mortgage rates, more people will want to de-leverage but it may not always be feasible to do partial prepayment as there is penalty during the lock-in period.

An interest offset loan has the same effect as prepayment when idle funds are deposited anytime to offset against monthy interest costs, without attracting a prepayment penalty.

3. Access To Liquidity With Minimal Cost

Now even if one has all the funds to fully redeem and discharge a loan, depleting all liquidity on hand requires careful deliberation.  What if one suddenly needs access to a cheap source of funds for emergencies or some unexpected situations like a change in one’s income position which makes it now difficult to apply back for term loan.  Don’t forget it’s harder to get the same quantum on a term loan as it entails more risk for the bank which grants a much-reduced loan amount after deducting CPF usage on the property.

Compare that with parking one’s idle funds in an interest offset account – there is no need for such prolonged deliberation as withdrawing funds for use in emergencies is as easy as putting money in with no restrictions whatsoever like a savings account!  For high networth individuals or seasoned investors, this access to liquidity is highly valued when a day’s delay could make or break a deal or cause one to pass up on an opportunity to snatch a steal (stock market corrections, distressed property sale, etc).

Compare All Latest Rates 2018

In fact, there is another good reason why one may not want to pay down fully on a mortgage – for estate planning where one could take up a mortgage insurance through having a home loan, thereby creating another set of inheritance in event of claims while still holding on to one’s cash. We will discuss that in a later article.

To balance things up, this access to liquidity does come with some minimal costs.  In scenario C above, by choosing not to fully paydown and discharge the loan, Mr. Tan is effectively “pre-paying” $490,000 and still service an interest of 2% p.a. on $210,000 (or put in another way – 0.60% p.a. on $700,000).  He also gave up the deposit interest he would have earned on $210,000 had he actually use $490,000 of his funds to prepay the loan and puts the remaining into a fixed deposit account.  Still, this combined cost of likely not more than  1% p.a. could be easily beaten with good timing on entry and exit points for investments.

4. No Loading On Interest Rate With SmartMortgage

The best part about HSBC’s SmartMortgage is that it does not load additional spread or interest on the floating rate home loan packages that the bank is offering at the moment.  This makes it an excellent choice for those who like to bet on floating rates staying low or going up very gradually, yet retain a level of control on how much interest costs to service very month through an interest offset account.

And HSBC is offering very competitive spreads on SIBOR-based home loans starting from +0.25% right now, along with some other very compelling benefits which our consultants would love to share with you. And don’t forget when you take your home loan through us here at MortgageWise, we also offer you real savings in transaction costs for both purchase (special legal fee of $1,800 net including mortgage stamp duty & gst) and refinancing ($150 valuation fee offset).  Both subject to a minimum loan of $500,000.

So, speak to us 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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board rate or sibor rate

Review Of FDR Interest Hikes In 2018

With the spate of increases in fixed deposit rates in Singapore last year leading to higher mortgage repayments for many homeowners who have chosen to peg their home loan rate to FDR (fixed deposit rate) mortgge pegs from the various banks, I thought it would be timely to take stock as we begin another year.

Compare All Latest Rates 2018

First, a recap of what is FDR (fixed deposit rate) home loans?  DBS pioneered this unique mortgage peg back in June 2014 when it started pegging the interest rate it charges for its home loans to a pre-designated fixed deposit rate tenure (eg.12-month, 18-month, 24-month) of deposits between $1,000-9,999 published on its website and called it FHR (fixed deposit home rate).  It gained traction in the market after a year and more banks followed suit with their own versions going by different names from FDMR (OCBC & Maybank), FDPR (UOB), FDR (SCB) to TDMR (HSBC).  At MortgageWise, we refer to these collectively as FDR home loans and track their movements closely over the years (see our chart).  However, with rising cost of funds, a few banks (OCBC, UOB, Maybank) have pulled the plug on FDRs and replaced them with traditional BOARD rates since 2018.  Curently only three banks still offer FDR home loans in the market: DBS, SCB and HSBC.

Now let us take a look at the many rounds of adjustments to FDR pegs by banks 2018 (in chronological order):

BankMortgage PegOld RateNew RateIncrease ByEffective Date
DBSFHR180.600.800.201 Feb
SCB48FDR0.500.900.406 Feb
MYBFDMR361.201.400.2010 Feb
OCBC15FDMR
48FDMR
0.25
0.95
0.55
1.25
0.30
0.30
1 Mar
UOB36FDPR0.651.000.355 Mar
DBSFHR90.250.500.259 May
FHR
(ave 12/24M)
0.675
0.35(12M)
1.00 (24M)
0.80
0.60(12M)
1.00 (24)
0.1259 May
MYBFDMR361.401.800.4026 Jun
OCBC36FDMR0.650.950.302 Aug
OHR1.001.300.3016 Aug
UOB15FDPR0.250.700.4527 Jul
14FDPR0.250.600.3527 Jul
DBSFHR80.200.500.3024 Aug
FHR90.500.800.3024 Aug
FHR
(ave 12/24M)
0.80
0.60 (12M)
1.00 (24M)
0.975
0.80 (12M)
1.15 (24M)
0.17524 Aug
FHR180.800.950.1524 Aug
SCB48FDR0.901.100.208 Nov
9FDR0.300.650.358 Nov
36FDR0.720.970.258 Nov
DBSFHR
(ave 12/24M)
0.975
0.80 (12M)
1.15 (24M)
1.075
0.95 (12M)
1.20 (24M)
0.1013 Dec
FHR180.951.100.1513 Dec
FHR90.800.950.1513 Dec
FHR80.500.6750.17513 Dec
OCBC15FDMR0.551.250.7016 Jan 2019
36FDMR0.951.550.6016 Jan 2019
48FDMR1.251.750.5016 Jan 2019
OHR1.301.80-2.000.50-0.7016 Jan 2019
MBR(Mortgage Board Rate)0.801.20-1.300.40-0.5016 Jan 2019

Compare All Latest Rates 2018

Note we included the latest hike for OCBC as part of 2018 review as it was announced back in December even though it took effect only in 2019 (this week).  For 2018, we also included OCBC’s OHR and MBR which are essentially BOARD rates, not FDR mortgage pegs.  However, going forward we will not be able to track them as they are of BOARD nature –not in the public domain or published anywhere on the bank’s website, and over time the bank could adjust the value of BOARD for different batches of loans depending on which periods these were signed and hence it is no longer of a singular value, unlike FDR peg.

With the many round of increases, it is easy to lose track of the total increases in the year for each FDR tranche so we summarize them below indicating the value at the start and end of the year (including HSBC which make no adjustment in 2018):

BankMortgage PegValue 1 JanValue 31 DecTotal Increase 2018
DBSFHR
(ave 12/24M)
0.675
0.35(12M)
1.00 (24M)
1.075
0.95 (12M)
1.20 (24M)
0.40
FHR180.601.100.50
FHR90.250.950.70
FHR80.200.6750.475
OCBC15FDMR0.251.251.00
36FDMR0.651.550.90
48FDMR0.951.750.80
OHR1.001.80-2.000.80-1.00
MBR(Mortgage Board Rate)0.801.20-1.300.40-0.50
UOB36FDPR0.651.000.35
15FDPR0.250.700.45
14FDPR0.250.600.35
MYBFDMR361.201.800.60
SCB48FDR0.501.100.60
9FDR0.300.650.35
36FDR0.720.970.25
HSBCTDMR240.650.650.00

The value in bold represents the current value of the mortgage peg.  The increases in the year fluctuates widely from 0.25% to 1.00% so it is hard to draw an average.  The only bank which never adjusted its FDR peg was HSBC with its TDMR24 launched to the market back in Dec 2017.  This means that those lucky few who signed onto HSBC floating rate packages earlier would still be paying around 1.65-1.78% today, even going into the 2ndyear of their loan tenure.  We do however expect one hike from the bank this year in 2019.

Compare All Latest Rates 2018

To put in perspective, the benchmark 3-month SIBOR has also moved up in 2018 following four rate hikes from the US Federal Reserve to end the year at 1.886%. It seems the banks moved quite quickly on FDRs to level up with the general rise in benchmark lending rates.

Does FDR home loans still make sense?  That depends.  There are couple of factors to weigh in like the outstanding loan amount, pace of interest rate increases going forward, intention of sale of property or to do partial prepayment, etc.  Speak to our team of very experienced mortgage consultants who have assisted thousands of happy clients make that right choice on the type of home loan to refinance to and why.

After all we are the few, or quite possibly, the only mortgage consultancy firm in the industry that tracks both macro events in the financial markets (that impacts interest rate) as well as interest rate movements per se so that we can give that professional and calculated view to our clients.  You may also like to read our general forecast of rate movement in 2019.  And don’t forget you will get a $150 Refinancing Valuation Fee Offset (for min loan $500,000) when you choose to apply for the same home loan package through MortgageWise.  It’s our way of helping clients to defray some of the costs involved in refinancing.  For more in-depth advice and mortgage strategies as we approach end-cycle, contact us 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.

Compare All Latest Rates 2018

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OCBC FDMR Home Loan

OCBC Hikes Home Loan Rates Across The Board

Following after DBS, last week OCBC announced hikes across its entire mortgage loan books (exclude SIBOR home loans which are market-driven and already risen) of approximately 0.55%, which is to take effect on 16 January 2019.  With two out of the three major mortgage lenders in Singapore announcing increases in its mortgage interest rate in the month of December which also saw US Federal Reserve hiking rates to near 2.50% in the US, there is no prize for guessing who will be the next to announce hikes.

Compare All Latest Rates 2018

The average increases this time is higher than what we would usually expect but we noted that in the last round of increases by OCBC in September, only certain tranches of home loans were affected.  Also, we know from our own sources that some segments of OCBC mortgage clientele have got their mortgage rate intact in September as the bank simply moved them to a new BOARD rate but kept the final interest rate unchanged.  What this means is that the bank is delaying the imminent hike and its impact on its clients until it is no longer able to do so with two more rate hikes from US Fed since.

Here’s a snapshot of the tranches affected:

Mortgage Pegs

 

Old ValueNew ValueIncrease ByEffective Date
15FDMR0.55%1.25%0.70%16 Jan 2019
36FDMR0.95%1.55%0.60%16 Jan 2019
48FDMR1.25%1.75%0.50%16 Jan 2019
OHR1.30%1.80-2.00%0.50-0.70%16 Jan 2019
MBR (Mortgage Board Rate)0.80%1.20-1.30%0.40-0.50%16 Jan 2019

Being a thought leader in the mortgage space in Singapore, we take it upon ourselves to track any movements in the home loans market by any lenders when they make announcements on changes to their published mortgage rates – primarily FDR or fixed deposit rate mortgage pegs.  The complexity of tracking increases when it comes to BOARD rates (like OHR and MBR above) which are internal lending rates not published anywhere on the bank’s website.  Also, the bank can decide to increase by varying amount for the same BOARD rate (eg. OHR where the increases are in the range of 0.50-0.70%) depending on which periods the loans are signed and hence it is almost impossible for any third party to be able to track these increases after a while.

MortgageWise will only be able to track the 5-year historical trending of FDRs from the various banks and map the movements of a single FDR tranche (initial launch tranche) from each bank against the benchmark 3-month SIBOR which you can find it here (OCBC’s latest increases reflected only after 16 January 2019).

With the latest round of rate adjustments from banks in December, most homeowners on floating rates would likely see their mortgage interest rising up to near 2%-2.20% level by our estimates, which is basically in-line with the prevailing floating rates (use our interactive Rates Display below to see the latest fixed and floating rates).

Compare All Latest Rates 2018

We will give our take on how we see interest rate moving in 2019 when we come back in the new year, so stay tuned to this blog.

At this moment, we do sense there is some resistance to refinancing to fixed rates which starts at 2.33-2.38%.  Not surprising given how much fixed rates have risen over the months.  And with uncertainties looming large in the global economy from trade rows between US and China, potential Brexit fallout from EU, a slowing economy in China, etc, we see more homeowners taking bets on floating rate home loans as we end the year with a stock market rout.  One thing for sure, it is getting harder to forecast on interest rate movements.

If your lock-in is expiring within the next six months or so, why not contact us now to stay abreast of the latest mortgage promotions from the various banks in 2019.  With a trusted mortgage advisor giving you the latest scoops on rate hikes and deviated rates promotion (for a limited period), you keep all your options open in a volatile market, be it fixed or floating rate home loans.

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.

Updated as at 10-Feb-2019new 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 = 0.675%MBR = 1.55%MR = 0.85%TDMR24 = 0.65%36FDR = 0.97%SRFR2 = 4.50%
Year 1FHR8 + 1.45% = 2.13%MBR + 0.75% = 2.30%MR + 1.45% = 2.30%TDMR24 + 2.13% = 2.78%36FDR + 1.08% = 2.05%SRFR2 - 2.45% = 2.05%
Year 2FHR8 + 1.45% = 2.13%MBR + 0.75% = 2.30%MR + 1.45% = 2.30%TDMR24 + 2.13% = 2.78%36FDR + 1.08% = 2.05%SRFR2 - 2.45% = 2.05%
Year 3FHR8 + 1.45% = 2.13%MBR + 0.75% = 2.30%MR + 1.45% = 2.30%TDMR24 + 2.13% = 2.78%36FDR + 1.08% = 2.05%SRFR2 - 2.45% = 2.05%
Year 4 & ThereafterFHR8 + 1.45% = 2.13%MBR + 0.95% = 2.50%MR + 1.65% = 2.50%TDMR24 + 2.13% = 2.78%36FDR + 1.08% = 2.05%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:

Updated as at 10-Feb-2019new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loan
Loan TypeOCBC Floating SIBORUOB Floating SIBORCITIBANK Floating SIBORHSBC Floating SIBORSCB Floating SIBORCIMB Floating SIBOR
Loan Peg3-month SIBOR1-Month SIBOR1-Month SIBOR1-Month SIBOR1-Month SIBOR1-Month SIBOR
Year 13-month SIBOR + 0.30%1-month SIBOR + 0.35%1-month SIBOR + 0.20%1-month SIBOR + 0.25%1-month SIBOR + 0.25%1-month SIBOR + 0.25%
Year 23-month SIBOR + 0.40%1-month SIBOR + 0.40%1-month SIBOR + 0.25%1-month SIBOR + 0.25%1-month SIBOR + 0.25%1-month SIBOR + 0.30%
Year 33-month SIBOR + 0.50%1-month SIBOR + 0.45%1-month SIBOR + 0.40%1-month SIBOR + 0.25%1-month SIBOR + 0.30%1-month SIBOR + 0.35%
Year 43-month SIBOR + 0.50%1-month SIBOR + 0.50%1-month SIBOR + 0.60%1-month SIBOR + 0.65%1-month SIBOR + 0.30%1-month SIBOR + 0.60%
Year 53-month SIBOR + 0.50%1-month SIBOR + 0.50%1-month SIBOR + 0.60%1-month SIBOR + 0.65%1-month SIBOR + 0.30%1-month SIBOR + 0.60%
Year 6 & Thereafter3-month SIBOR + 0.50%1-month SIBOR + 0.50%1-month SIBOR + 0.60%1-month SIBOR + 0.65%1-month SIBOR + 0.30%1-month SIBOR + 0.60%
Lock-In Period2 years1 year2 years2 years2 years2 years
Partial Redemption PenaltyNil (up to 50%)Nil (left $200K)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/RebateYes0.40% of loan0.40% of loanYesYes0.40% of loan
Subsidy Cap At$2,000$1,800$1,800$2,000$1,800$2,000
Min. Loan (for subsidy)$500,000$100,000$100,000$500,000$500,000$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

 

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.

Updated as at 10-Feb-2019new 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 = 0.675%MBR = 1.55%MR = 0.85%36FDR = 0.97%SRFR2 = 4.50%
Year 1FHR8 + 1.45% = 2.13%MBR + 0.40% = 1.95%MR + 1.10% = 1.95%36FDR + 0.98% = 1.95%SRFR2 - 2.55% = 1.95%
Year 2FHR8 + 1.45% = 2.13%MBR + 0.40% = 1.95%MR + 1.10% = 1.95%36FDR + 0.98% = 1.95%SRFR2 - 2.55% = 1.95%
Year 3FHR8 + 1.45% = 2.13%MBR + 0.40% = 1.95%MR + 1.10% = 1.95%36FDR + 0.98% = 1.95%SRFR2 - 2.55% = 1.95%
Year 4 & ThereafterFHR8 + 1.45% = 2.13%MBR + 0.40% = 1.95%MR + 1.10% = 1.95%36FDR + 0.98% = 1.95%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

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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.

Updated as at 10-Feb-2019new 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 = 0.675%MBR = 1.55%MR = 0.85%TDMR24 = 0.65%36FDR = 0.97%SRFR2 = 4.50%
Year 1FHR8 + 1.45% = 2.13%MBR + 0.75% = 2.30%MR + 1.45% = 2.30%TDMR24 + 2.13% = 2.78%36FDR + 1.08% = 2.05%SRFR2 - 2.45% = 2.05%
Year 2FHR8 + 1.45% = 2.13%MBR + 0.75% = 2.30%MR + 1.45% = 2.30%TDMR24 + 2.13% = 2.78%36FDR + 1.08% = 2.05%SRFR2 - 2.45% = 2.05%
Year 3FHR8 + 1.45% = 2.13%MBR + 0.75% = 2.30%MR + 1.45% = 2.30%TDMR24 + 2.13% = 2.78%36FDR + 1.08% = 2.05%SRFR2 - 2.45% = 2.05%
Year 4 & ThereafterFHR8 + 1.45% = 2.13%MBR + 0.95% = 2.50%MR + 1.65% = 2.50%TDMR24 + 2.13% = 2.78%36FDR + 1.08% = 2.05%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

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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:

Updated as at 10-Feb-2019new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loan
Loan TypeOCBC Floating SIBORUOB Floating SIBORCITIBANK Floating SIBORHSBC Floating SIBORSCB Floating SIBORCIMB Floating SIBOR
Loan Peg3-month SIBOR1-Month SIBOR1-Month SIBOR1-Month SIBOR1-Month SIBOR1-Month SIBOR
Year 13-month SIBOR + 0.30%1-month SIBOR + 0.35%1-month SIBOR + 0.20%1-month SIBOR + 0.25%1-month SIBOR + 0.25%1-month SIBOR + 0.25%
Year 23-month SIBOR + 0.40%1-month SIBOR + 0.40%1-month SIBOR + 0.25%1-month SIBOR + 0.25%1-month SIBOR + 0.25%1-month SIBOR + 0.30%
Year 33-month SIBOR + 0.50%1-month SIBOR + 0.45%1-month SIBOR + 0.40%1-month SIBOR + 0.25%1-month SIBOR + 0.30%1-month SIBOR + 0.35%
Year 43-month SIBOR + 0.50%1-month SIBOR + 0.50%1-month SIBOR + 0.60%1-month SIBOR + 0.65%1-month SIBOR + 0.30%1-month SIBOR + 0.60%
Year 53-month SIBOR + 0.50%1-month SIBOR + 0.50%1-month SIBOR + 0.60%1-month SIBOR + 0.65%1-month SIBOR + 0.30%1-month SIBOR + 0.60%
Year 6 & Thereafter3-month SIBOR + 0.50%1-month SIBOR + 0.50%1-month SIBOR + 0.60%1-month SIBOR + 0.65%1-month SIBOR + 0.30%1-month SIBOR + 0.60%
Lock-In Period2 years1 year2 years2 years2 years2 years
Partial Redemption PenaltyNil (up to 50%)Nil (left $200K)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/RebateYes0.40% of loan0.40% of loanYesYes0.40% of loan
Subsidy Cap At$2,000$1,800$1,800$2,000$1,800$2,000
Min. Loan (for subsidy)$500,000$100,000$100,000$500,000$500,000$100,000
new purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loannew purchase housing loan

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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.

Updated as at 10-Feb-2019new 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 = 0.675%MBR = 1.55%1M SIBOR1M SIBORSRFR2 = 4.50%BOARD = 4.65%BOARD = 6.00%1M SIBOR
2-Year FixedY1: 2.60% (Fixed)Y1: 2.68% (Fixed)Y1: 2.68% (Fixed)Y1: 2.70% (Fixed)Y1: 2.58% (Fixed)Y1: 2.18% (Fixed)Y1: 2.50% (Fixed)Y1: 2.53% (Fixed)
Y2: 2.60% (Fixed)Y2: 2.68% (Fixed)Y2: 2.68% (Fixed)Y2: 2.70% (Fixed)Y2: 2.58% (Fixed)Y1: 2.38% (Fixed)Y2: 2.50% (Fixed)Y2: 2.53% (Fixed)
3-Year FixedY1: 2.88% (Fixed)nilY1: 2.88% (Fixed)Y1: 2.90% (Fixed)nilY1: 2.5% (Fixed)nilY1: 2.75% (Fixed)
Y2: 2.88% (Fixed)nilY2: 2.88% (Fixed)Y2: 2.90% (Fixed)nilY1: 2.60% (Fixed)nilY2: 2.75% (Fixed)
Y3: 2.88% (Fixed)nilY3: 2.88% (Fixed)Y3: 2.90% (Fixed)nilY1: 2.75% (Fixed)nilY3: 2.75% (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$200,000$200,000$100,000$100,000$250,000$500,000
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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DBS Raised FHRs Across The Board

Last week DBS announced on its website across-the-board adjustment of its Sing Dollar Fixed Deposit rates from 7-month to 60-month tranches on 24 August, which will also hit all housing loans tied to its popular FHR peg. 

The announcement on DBS’s website (reproduced here) as follows:

DBS FHR rate hikes

 

This latest move from the market leader comes after rate hikes to selective tranches announced last month by its two other local rivals in the mortgage business OCBC and UOB, which was also reported in this blog.  Homeowners will be receiving letter notifications from the bank soon and the new rates should apply after a one-month notice as required.

Compare All Latest Rates 2018

 

With rate hikes coming fast and furious now almost every other month, since the start of 2018, I am not surprised almost every single FDR home loan peg in the market has been adjusted this year, some by more than one time in the space of a few months.  It is no wonder most clients are jumping on the bandwagon of fixed rate home loans in recent weeks.  Before we go on, here’s a quick summary on the exact impact to affected customers who are on DBS floating rate housing loans:

 

BankMortgage Peg*Date*Old RateNew RateIncrease By
DBSFHR824 Aug0.200.500.30
DBSFHR924 Aug0.500.800.30
DBSFHR
(ave of
12 & 24M)
24 Aug0.80
0.60 (12M)
1.00 (24M)
0.975
0.80 (12M)
1.15 (24M)
0.175
DBSFHR1824 Aug0.800.950.15

*FHR is the original tranche FHR launched by DBS in 2014 defined as ave between 12M and 24M FD which has increased from 0.60 to 0.80 and from 1.00 to 1.15 respectively.

 

No one likes a higher monthly repayment, however when tides are rising, all ships eventually go for those on floating rate mortgages.  The speed of increases this year (where the local banks take turns to raise its mortgage pegs) has caught many by surprise, but the magnitude of increase has by and large stayed within an average of 0.30% for most.  And if you look at how SIBOR itself has increased (see purple line below) in past 6 months from 1.10% to 1.63% (as at 6 Aug), the banks are simply playing catch up.

FDR rate hikes 2018

 

Compare All Latest Rates 2018

 

 

With the latest economic indicators coming out from US indicating continued strong growth, US Fed is poised to hike in its FOMC next month (we will bring you our summary report and analysis here so watch this space). All the signs seem to point to further liquidity crunch, which has seen all the banks here rolling out numerous deposit promotions over the last few months in a bid to bring in more funds. It is fair to say, barring any unforeseen events, mortgage rates look set to go further north in the near future.  Homeowners who are near their lockin expiry will do well to start looking around for the best fixed rates and take action quickly before it rises above 2%.

 

And there is no better time to do that now by reaching out to us here at MortgageWise.sg – we can offer you a zero-cost option for refinancing subject to min loan $500,000 (terms apply).  By all means do get a repricing quote from your current bank first, and let us run the numbers and see if it makes sense to switch. There are many mortgage lenders out there hungry for your business.  That is the beauty of free market!

If you act fast, we can still get you 3-year fixed rate at 1.90% or 2-year fixed rate at 1.68% (with some conditions attached).  Speak to our consultants to find out more how it works.

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest trends in the industry, providing useful mortgage tips, and making sense of rate movements.  We aim to build trust with clients for longer-term partnership and not just do product-pushing for a one-time deals unlike bankers. That’s why we always present “whole-of-market” perspective including packages that banks do not pay us.  See our clients’ testimonials.

 

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BOARD Rate Makes A Comeback

In recent months, one by one, lenders who offered FDR (fixed deposit rate) home loan pegs in the market started to pull the plug on this all important mortgage peg and replaced them with the traditional BOARD rates, even though some give it a new name like MR (mortgage rate).  One bank even go as far as to replace loans on its existing books from FDR to the new BOARD, hence migrating them in batches over time to phase out FDR completely at some point we gather.

Compare All Latest Rates 2018

 

Is this a good development for the mortgage industry in Singapore?  We think not.

As much as we are paid by lenders for distributing mortgage products in Singapore, we do have a duty to report developments in the industry from rate hikes by individual banks to significant strategy changes like replacement of mortgage pegs.  Hence, we need to voice our conerns here independently as a thought leader in the industry and we do have something to say about this recent development which we see as a step backward.

I believe the biggest beneficiaries from this will be the three remaining banks, still with FDR home loans firmly in offering for their clients be it for new loans or renewals, namely DBS, StanChart and HSBC.  Why do I say that?  There are two reasons and I let me explain shortly.  First it is noteworthy for me to point out that DBS, which pioneered the whole concept of pegging mortgage interest rate to deposit rates back in 2014 (probably a first in the world), has remained the most steadfast and consistent in terms of its mortgage strategy and execution which bodes well for shareholders of the bank.

 

The Withdrawal Proves Its Usefulness

We have long said in this blog that the cost structures and funding strategies of the banks are all different and there is no point speculating whether longer tenure FDR tranche will go up more often or less often than shorter tenure tranches.  Some banks will find it harder to manage FDR than others, ie. the cost implications for raising deposit rates is more real for some than others.  With the recent moves, apparently what we said is true as some banks decided to call it quits for FDR loans.

Compare All Latest Rates 2018

 

However, the irony is this – the very fact that some lenders are finding it difficult to maintain or hike FDR without hitting their costs proves what we have been advocating all this while is correct, that FDR makes for a better mortgage peg than SIBOR or BOARD, when interest cycle is going up.

We do not fully comprehend what is going on behind the scenes for the withdrawal of FDR mortgage peg.  Perhaps there is a change in the banks’ mortgage strategy, with the recent run-up in SIBOR.  Or there are some changes in the management team which brings new direction.  No matter what cause the withdrawal, what is certain is that the market will now perceive FDR to be the preferred mortgage peg even more so than before.  Which leads me to my next point.

 

Those Who Want FDR Will Have To Refinance Out

Those who were on FDR home loans previously and who now like to stay put on the same mortgage peg on renewals would be forced to look elsewhere as their existing banks no longer offer the peg.  Unless they choose fixed rates for repricing, otherwise they would most likely be given the option of switching over to either a SIBOR-based or BOARD-based home loan package.

And instead of total 6 lenders offering FDR in the past, we are now down to half this number who might get bulk of the business going forward.

 

Of course, this is only our opinion and we could be wrong in our assessment.  We also need to put a caveat here – how the individual banks manange their various FDR increases over time will say a lot about who is more dependable as a lender who maintains a fair rate hike policy that is commensurate with the overall increase in market interest rate.  We know of clients who were upset with recent increases in FDR from one bank that come right on the heels of a hike barely just 4 months earlier.

So, it does not always mean that choosing FDR would triumph over BOARD – making sure you pick the right FDR tranche with the right lender is more important.  To this end, it makes perfect sense to use the service of a professional mortgage consultant who tracks the all the changes in the mortgage market closely. Speak to our consultants now.

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Still by and large, for floating rate packages we would still argue for FDR over BOARD or SIBOR for the simple fact that it has proven to be less volatile so far and lenders have largely waited considerable time lags before announcing any unpopular hikes.  For this reason, we hope lenders would bring back FDR home loans at some point when they sense that it can be a viable mortgage tool that works for both homeowners as well as lenders themselves.  Afterall, if you think about it deeply, FDR can really work just like a BOARD rate which morphs into multiple tranches over time.  For example, lenders can break FDR into 50 tranches from 1-month to 50-month fixed deposit to carry the idea to the extreme.  Not every tranche of fixed deposit is going to cost the bank in the same way when they choose to hike it.

The real difference from our perspective is that, as all FDR rates are published publicly on the bank’s website, FDR increases are more visible and hence under greater scrutiny than increases in BOARD rates which are less transparent.  But isn’t that the fundamental reason why the market would prefer FDR over BOARD in the first place?  And also why we would still recommend FDR as the way forward for homeowners in Singapore.

 

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest trends in the industry, providing useful mortgage tips, and making sense of rate movements. We aim to build trust with clients for longer term partnership and not just do product-pushing for a one-time deal unlike bankers. That’s why we always present “whole-of-market” perspective including packages that banks do not pay us. That’s why many have chosen to work with us in the end notwithstanding the sheer number of brokers and agents out there. See their testimonials.

 

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rising interest rate

Interest Rate Rising?

Last week, two banks announced the latest hike to their FDR home loan pegs with Maybank’s FDMR36 going up from 1.40% to 1.80% on 26 Jun, and OCBC finally moving up their 36-month FDR as well from 0.65% to 0.95% effective 2 Aug.  The latter move was correctly predicted by us (on 23 May) as the next likely FDR to be revised up after the recent increase by DBS also in May.

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Has cost of funds went up in the interbank market after the latest US Fed rate hike in June?  We are not quite sure to be honest and as I have mentioned before in this blog, banks will always be privy to any rate movements in the interbank before the rest of the market finds out and it does seem like liquidity is drying up (see graph below) with a strengthening dollar over the past month.  And as of 3 July, 1-month and 3-month SIBOR has went up to 1.44809 and 1.57483 respectively.

FD link rate hikes

 

Here’s a few other noteworthy observations:

1. Fixed Rates Are Going Up

The local banks, which always set the benchmark being market leaders, have moved up their fixed rates from 1.85-1.95% from a month ago to the prevailing range of 1.95-2.18%.  At current moment, there are just less than a handful of foreign lenders still holding on to 2-year fixed rate at 1.75% or 3-year fixed rate at average 1.82%, but not for very much longer.  My take is they would soon catchup after July.

So, for those who concur with the consensus view that rates can only go north from here, and who like to lock down fixed rates at 1.75% level, you would need to act quickly.  Speak to our consultants today who can run the numbers and show you how much you stand to save, especially when we are now offering exclusively to MortgageWise clients our “Zero-Cost Refinancing” option.

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2. Floating Rates Are Also Going Up

We just said that local banks always set the benchmark, especially DBS with access to the largest pool of Sing dollar funding in its CASA (current account and savings account) base of POSB accounts. The bank has just raised its prevailing floating rate from 1.65% to 1.75% throughout on 22 June last month, and other lenders are poised to follow soon.

Incidentally DBS still keep to its old rate of 1.65% for those who signed up directly on its website but with a need to purchase mortgage insurance and some other conditions applicable.  And it is also giving a $500 SIA voucher for applications by this month.  Now not many brokers, perhaps none, would be telling clients about direct promotions by banks for fear of losing the deal.  However, at MortgageWise, we always begin our advisory from a long-term partnership perspective and we have no qualms giving you that “whole-of-market” view of all available packages.  In fact, we think we have even more compelling overall value for you at the moment be it new purchase loan or refinancing.  Let us prove to you with numbers why we think so, and you will likely agree with us.

3. Longer-Tenure FDR Tranches Not Always The Best

I have covered this point in great details in my last blog post, debunking some erroneous views that I read on some mortgage sites that longer-tenure tranche FDR with low “spreads” (technically not the real spreads) makes a better option than 8-month FDR for example.  The recent moves by Maybank and OCBC have proven my point that higher FDR values (with low spreads) can go even higher, because no one really walks into a bank to place a fixed deposit for 36-month, will you?

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We also do not presume to know how the different banks’ Treasuries operate in terms of funding structure and hedging strategies. The only reasonable comparison to make on spreads is when the underlying base is the same like SIBOR home loans.  Here, a spread of mere 0.10% for OCBC home loans in the first year for example, above the 3-month SIBOR, is indeed the lowest spread for all SIBOR loans in the market at the moment.  To some extent, if US Fed rate hikes gain pace, a 3-month SIBOR also has a slight laggard effect than 1-month, though the actual difference in interest savings is arguable over long periods.

At the end of day, remember FDR tranches be it 8-month, 9-month, 14-month, 24-month or 36-month are controlled by lenders just like different tranches of BOARD rates, as they are no longer a pure deposit rate or cost of funds for banks but act as a lever for banks to increase their interest margin.  And let me re-iterate this point once more – for some banks, the cost implications for raising certain FDR tranches is more real than others.  Speak to our consultants who can explain to you more on that and why we believe that, at MortgageWise, we have a better way of selecting FDR tranches.

 

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest trends in the industry, providing useful mortgage tips, and making sense of rate movements. We aim to build trust with clients for longer term partnership and not just do product-pushing for a one-time deal unlike bankers. That’s why we always present “whole-of-market” perspective including packages that banks do not pay us. That’s why many have chosen to work with us in the end notwithstanding the sheer number of brokers and agents out there. See their testimonials.

 

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FDR, SIBOR, BOARD

Review Of FDR Home Loans

With the recent spate of rate hikes to FDR (fixed deposit rate) home loan pegs since the start of the year (see our reports in this blog), has FDR lose some of its lustre as a more stable and preferred mortgage peg amongst homeowners in Singapore?  Not exactly.

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Naturally, the emotional response to any rate hikes is to baulk at it and cry foul.  However, as the recent increases this year are across-the-board with total of 5 banks moving up their various tranches of FDR (the only bank yet to make a move on its FDR is HSBC), most homeowners have come to accept the increase as broad-based and market-driven.  It is because the prevailing interest rate characterized by SIBOR has gone up first and banks are now simply playing catchup.  Unless one is locked down on a fixed rate, it will not be fair to expect floating rates to behave like fixed rates if the benchmark interest rate 3-month SIBOR has moved back up from 1.12% to 1.50% in the last 6 months.

Before we go on, we need to give a brief history of what is FDR home loans.

 

What Is FDR Home Loans And How Does It Work?

This could likely be a uniquely-Singapore innovation in the mortgage industry first introduced by DBS in Jun 2014 when it started pegging its home loans to a chosen fixed deposit rate tranche (average of the 12-month and 24-month fixed deposit rate for deposits in the band $1,000 to $9,999) and named its peg FHR (Fixed Deposit Home Rate).  Though initially shrugged off by its peers in the industry, it has taken the market by storm and by 2015 all the major mortgage lenders have rolled out their own version of what we refer to collectively as FDR or “fixed deposit rate” home loans – in the order of OCBC, SCB, UOB, MAYBANK and finally HSBC which was the last to launch its 24TDMR (pegged to 24-month fixed deposit) last December in 2017.

How FDR home loan works is that, instead of pegging mortgage interest traditionally to 1-month or 3-month SIBOR which fluatuates on a daily basis as determined by demand and supply forces in the money market, the interest is pegged to a published deposit rate for a particular tranche of fixed deposit as defined by the respective bank.  For example, the latest FDR tranche to be introduced to the market is StanChart’s 36FDR pegged to its 36-month fixed deposit rate, currently at 0.72%.  This rate will change once banks revise its deposit rates like what happened earlier in the year, and the bank will give a one month’s notice in writing before actually moving up the mortage interest rate.

 

How Does It Compare To Other Mortgage Pegs?

Generally, there are three types of mortgage pegs in the Singapore market which are neatly summarized in the chart below:

mortgage pegs comparison

All the eight major mortgage lenders in the market offer SIBOR home loans but only four offer FDR home loans after OCBC replaced its FDR with OHR (OCBC Home Rate) last October.  The latter is somewhat of a BOARD rate except that the bank has indicated that it will take reference on the long-term average of SIBOR, but stop short of giving a pre-defined formula for how OHR will be calculated or set.

 

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How Has FDR Moved Historically So Far?

As banks tend to “close out” a tranche of FDR after it has signed up a good number of mortgage accounts pegged to it, before “opening” a new tranche on a whole different FD tenure, over time it becomes difficult for the market to track the historical patterns.  Not unless you choose to work with a professional mortgage consultant.

At MortgageWise, this is one of the value-add we provide to clients as we monitor very closely all FDR tranches released and closed off by the respective lenders.  To give you an overview, we present here the 5-year historical trendings of the “initial-launched” tranche of FDR from each bank, as that would give the longest history of its correlation with 3-month SIBOR.  Newly-launched or tranches currently in offer will not give any meaningful insights as we will not see any increases yet.

SIBOR vs FDR tracking

 

If you like to see the mapping out of all FDR tranches within the same bank, just ask our consultants for it as it is almost impossible to map out over a dozen tranches on the same chart.  Better yet, work with us long-term as your trusted mortgage consultant and you can access the most accurate mortgage information, along with the latest rates (including special deviated rates from time to time) whenever you like to do a review.

As you can see from the chart, the long-term trending of SIBOR (3-month) is a gradual uptrend in the last 5 years but with a period of softness in the last two years.  That has changed in the final months of 2017 with a strong pickup in rates followed by a V-shape pattern.  We are expecting the longer term trendline to continue with 2 more hikes by US Fed this year and 3 more next year.  Initial-launched FDRs have remained stable for long periods and the broad-based hikes earlier this year is well justified reflecting the strong pick up in interest rate over the last few months.

 

Conclusion on FDR Home Loan

On the whole, lenders have largely kept to their side of the deal where they would calibrate carefully each hike on FDR to follow only after the increase in SIBOR.  You can see from the chart that the recent run-up in SIBOR (3-month) started around October 2016 and it took 1.5 years for SIBOR to move up roughly 40 basis points (from average 0.90% to 1.30% in the period), whereas the broad-based reaction from lenders come as a laggard and some tranches the increase was half of 0.40% (read our other report).

Hence, we maintain our stance that in an environment of rising rates, SIBOR would be the first to move up and FDR will continue to be a laggard mortgage peg.  For those who use the service of a professional mortgage advisor, this laggard effect could be further enhanced by targeting the correct FDR tranche in the market at time of loan application.

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That brings me to another point which I like to make as I read some blogs out there propagating the idea that longer-tenure FDR tranches make a better choice as it comes with “lower spreads”, or that shorter-tenure FDR tranches have more room to go up as they start from a lower base. As there are different cost structures amongst different banks with local banks having access to the largest pool of Sing dollar funding than their foreign peers, it is hard to decipher which deposit tranche will go up more than the rest.  Also, no one really walks into a bank to place fixed deposit for a 36-month tenure, will you?  So logically with a smaller base of deposit accounts on longer-tenures, such FDRs will tend to exhibit more the nature of a mortgage-lending rate than that of a deposit-funding rate to the bank.

The truth is no one really knows how banks would manage the various deposit tranches going forward as they also act as a lever for banks to raise interest margin with the concept of FDR. Some banks may also decide to meaningfully hold back the increase for certain tranches for strategic or competitive reasons.  Case in point – OCBC raised all its FDR tranches in March this year except for its 36-month FDMR, which come as a pleasant surprise for some.

By keeping watch and monitoring closely FDR movements in the market against SIBOR, we do offer our own assessment on what we believe is a much better way to time FDR increases and pick the right FDR tranche for the most interest savings.  Speak to our consultants 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 trends in the industry, providing useful mortgage tips, and making sense of rate movements. We aim to build trust with clients for longer term partnership and not just do product-pushing for a one-time deal unlike bankers. That’s why we always present “whole-of-market” perspective including packages that banks do not pay us. That’s why many have chosen to work with us in the end notwithstanding the sheer number of brokers and agents out there. See their testimonials.

 

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DBS Bank Singapore

When Will Lenders Hike FDR Again?

Earlier this month on 9 May, DBS revised the board fixed deposit rates from 9 to 12 months affecting the FDR home loans for two tranches – FHR9 and the original FHR (definited as the average between the 12-month and 24-month FD rate).  The changes are as follows:

BankMortgage Peg*Date*Old RateNew RateIncrease By
DBS

 

FHR99 May0.250.500.25
DBSFHR
(ave of 12M & 24M)
9 May0.675
0.35(12M)
1.00 (24M)
0.80
0.60(12M)
1.00 (24)
0.125

* This is the date where the FD rate is adjusted, the FDR hike will only take effect after a 1-month notice by the bank which will be sometime in June.

 

With this latest move and the most recent broad-based hikes in February, almost all the past tranches of FDR home loan pegs offered by all six lenders with FDR home loans since 2014 have moved, except for OCBC’s 36FDMR.  See our review on the last FDR rate hikes in February.

With US 10-year yields breaching the all-important 3% point and staying up, and with at least two or maybe three more rounds of rate hikes by US Fed this year with one upcoming in next month’s FOMC, the upward trajectory of SIBOR seems intact.  At MortgageWise, we usually only adjust our forecast after the June FOMC if need be, and with SIBOR back to where we started the year at – above 1.50% (3-month SIBOR), we are likely to maintain our forecast that it will finally hit the 2% mark in over a decade before the year is up.

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Does this mean that all of us should jump on the fixed rate mortgage wagon?  Yes and no.

The facts have held up FDR thus far to be a reliable and stable mortgage peg and a laggard to SIBOR movements.  On the whole, the increases to FDR peg has been in the region of 0.20% to 0.30% and coming only after a big movement of SIBOR by almost 0.50% in the past year.  And we have observed that it takes approximately a year and a half before lenders would hike a new FD tranche as it takes time to sign up a significant number of loans before any hike would be meaningful enough to lift interest margin.  That said, we would expect the next broad-based hike to happen in early 2019 for the current tranche of FDRs (FHR8, FDPR14, FDR9) on offer from the major banks, as these were launched mostly in Q4 of 2017.  This is also contingent on our forecast that 3-month SIBOR will hit 2% by end of the year which is another 50 basis point climb from the current levels.  However, we do think a few specific FDR pegs might hike much earlier before the year is up and most notably OCBC’s 36FDMR which has not moved since day one of its launch (still at 0.65%) which is kudos to the bank’s commitment to customers and augers well for those signing up for its new OHR home loan peg.

Still, at such snail pace of a mere 0.25% climb per year in FDR, it is not a clear-cut knock-out decision to go fixed yet.  One needs to look at various factors like the need to sell, paydown etc. which would not be available in most fixed rate home loans that come with lock-in periods.  The size of the outstanding loan is also important.  There are at least six factors to consider before deciding on fixed versus floating rate home loan and we have got that covered neatly in another article published in March in this blog.

Compare All Latest Rates 2018

 

Curently the gap between fixed and floating rate is still hovering in the range of 0.15% to 0.25% which predisposes the choice more to fixed in the current interest rate cycle.  We would thus recommend most to go on the lowest fixed rate for loans below $1m.  And to this end we make no distinction between local or foreign lenders, and between big or small banks.  A fixed rate contract is exactly what it is defined as – fixed repayment that one contracts with the bank during the fixed term. There is no need to side-guess which FDR peg will rise up by when and by how much.

But for bigger loans, every basis point savings count and it might still be alright to take a bet on FDR or even OCBC OHR with such snail pace of increases we have seen recently.  Incidentally, the smartest thing to do here might be to sign on to a FDR tranche that is newly-launched which in theory has the least propensity to move up in the near term for reasons we have articulated earlier.

If in doubt, speak to our dedicated consultants today who could do a review on your mortgage and calculate which package yields the most savings over time using our proprietary Interest Simulator.

And for those with no lock-in or lock-in expiry within 6 months, this could be the best time to review as we just launched our Zero-Cost Refinancing benefit for all MortgageWise clients, terms and conditions apply.

 

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, taking deep dives into the latest trends in the industry, providing useful mortgage tips, and making sense of rate movements. We aim to build trust with clients for longer term partnership and not just do product-pushing for a one-time deal unlike bankers. That’s why we always present “whole-of-market” perspective including packages that banks do not pay us. That’s why many have chosen to work with us in the end notwithstanding the sheer number of brokers and agents out there. See their testimonials.

 

Compare All Latest Rates 2018

 

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