rising interest rate

Interest Rate Forecast 2019

First, let me wish all readers of this blog a Happy New Year in 2019!

A food-for-thought to share as we begin a new year: If a lifetime is defined as 70 years long, and 10 years is equivalent to a single day in a week, which day are you at in 2019?  My guess is for most of us reading this blog, it would be on a Thursday (30s) or Friday (40s) – well then weekend’s just round the corner and let’s make it a smashing good one and make it count!  All the best.

Compare All Latest Rates 2018

Interest rate forecast is a tricky business and most would rather not stick their neck out for it but here at MortgageWise we do this at the start of every year.  We are not perfect but I think we have been close in our call in the last two years.  At start of 2017 we forecasted 3-month SIBOR to end at 1.50% but revised this down later (we review forecast every 6 months) to a range of between 1.25-1.30%.  SIBOR did make a dash of 25 basis points in last 4 days of 2017 to cross 1.50% in the end.  We did however correctly forecast three rate hikes by Federal Reserve in the year.  At the start of 2018 last year, I think we were the most aggressive in the market with our forecast for SIBOR to cross 2% by end of the year (from what I was reading at that time, the most bullish forecast from bank analysts was for 3-month SIBOR to hit 1.70%).  We didn’t get it exactly right this time but we were close – 3-month SIBOR ended 2018 at 1.886% (as at 31 Dec 2018).  1-month SIBOR also ended at a high of 1.76342%.  We overshot in our forecast as the gap (we notice) between 3-month SIBOR and the Fed funds rate has widened to roughly 50 basis points or 0.50%.  See the correlation chart below.  We were however right in our prediction that wage inflation will pick up strongly in US in 2018 which might play a part in Fed revising from three hikes to four in 2018, even though the link between wage and price inflation has been weakening.

SIBOR vs Fed funds rate

What now for 2019?  I must say this is going to be the most difficult forecast to make in recent years no thanks to the trade war between US and China in which the effect is slowly being felt in the global economy from 2019 onwards.  No one can predict for sure what is going to happen while the stock market, being a precursor to the real economy, has signaled volatility ahead.  The US Fed has revised its forecast from three hikes this year down to two in its Dec FOMC (Federal Open Market Committee) while maintaining US economy stays solid for now, borne out by the payroll numbers just released of 312,000 new jobs added in the month of December.  Still there is a great fear that either a slowing China culminating in an economic meltdown or a US Fed that go too “fast” in hiking rates (blasted by Trump) would trigger the next global recession sooner than expected.  No one knows.  In the midst of all the “noise”, I can only draw on two factors as basis for our forecast:

Compare All Latest Rates 2018

1. The Stakes Are Too High On Both Sides

Though hard, I believe there will be some kind of deal by US-China by the deadline of 1 March 2019, or in due course sometime in the year.  The stakes are simply too high for leaders on both sides politically not to strike a deal.  So, I am betting that such a deal will materialize and be cheered by the market and get the global economy back on the growth path once more.

Two other impetus will help to keep the global growth intact, albeit slower than expected.  China will pull out all stops to keep its economic engine revving along through massive fiscal stimulus with its huge reserves like what it did back in 2008.  You can bet on that when needed.  As for the US, even as President Trump wrestles with a divided Congress where the Senate is controlled by the Republicans and the House by the Democrats, it is likely they would still pass the last of his campaign promise which is bi-partisan – a big infrastructural stimulus plan to rebuild America’s roads, bridges, airports, etc.

Overall, I do not see a global recession as yet in 2019 as there is political will on both sides of the Pacific to boost their domestic economy and get their GDP growth going again.  The current turmoil in financial markets will pass.

2. Twin-Effect of Monetary Tightening

I also believe the Fed will become more mindful to its actions on the balance sheet, or QT (Quantitative Tightening), where it is selling Treasuries and mortgage-backed securities to the tune of US$50b per month now into its 2nd year (started in Oct 2017).  This has the effect of “mopping up” money supply and liquidity in the system and is a form of tightening or “increasing interest rates” at the longer end of the curve, ie. 10-year & 30-year Treasuries.  The Fed targets to unwind about half of its positions of US$4.5t of securities accumulated during its three rounds of QE actions in the last financial crisis. Initiallty the Fed chair Jerome Powell has erred in dismissing the idea that the bond sale programme could be tweaked and held it up to be on an “auto-pilot”.  That roiled financial markets and the Fed has since been forced into admitting that the QT programme is not cast in stone and is open to making any changes needed should the data shows that US growth is deteriorating at some point.

What this means is that going forward in FOMC meetings from 2019, Fed will likely err on the side of caution not to over-hike at the short end of the curve (fed funds rate) if they would like to keep the pace of QT programme intact.

Compare All Latest Rates 2018

Our Forecast

After giving the two factors that underpin our forecast, this is what we think will happen in 2019: US Fed will indeed, like it said, hike twice in 2019 especially if growth gets back on track and we would see US Fed funds rate go near to 2.75-3.0% range by end of 2019.  In fact, the good news is I believe this is likely near the end cycle for interest rate and going beyond 2019 it is quite hard to imagine Fed hiking above 3% for two reasons.  First, as explained there is double-effect of monetary tightening both at the short and long end of the curve at the same time due to the unprecedented measures taken in the last crisis; which means the Fed need not go all the way to 4-5% in hiking short-term rates unlike in past cycles.  Second, I suspect that the longer-run “neutral rate”, where the Central bank is neither accommodating or restricting growth, has now been brought down to a much lower level with technological advances causing inflation not to show up quickly.  This has been the theme in the last few years and for as long as inflation stays muted, the Fed will be criticised for hiking too much.

What this means then for Singapore interest rate is that by end of 2019, 3-month SIBOR would go close to 2.3% while 1-month SIBOR would hover in the range of 2.1-2.2%.  Still it would take six months to get there provided we get all our predictions above correct. We would have to revisit this forecast again in June.  Meanwhile SIBOR would most likely trade sideways at the current levels of between 1.8-2.0% for a short period of time at least in the 1st half of 2019.

In 2019 most homeowners in Singapore, except for those on fixed rates, would be paying close to 2.2-2.3% as we are expecting a few more banks to announce rate hikes in the next few months.  Those with lock-ins expiring within the next 6 months could contact us for a quick review of their mortgage interest.

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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Mortgage Loan In Singapore

Fed Funds Rate Rises To Near 2.50%

In its latest December FOMC, US Fed has finished what it set out to accomplish this year – four hikes in 2018.  But it has now revised downwards its forecasted number of rate hikes in 2019 from three to two, as anticipated by the market from its recent rhetoric.

Compare All Latest Rates 2018

Fed funds rate now rises to a range between 2.25% and 2.50%, which is a pre-cursor to what will happen to SIBOR rate here in Singapore (see graph below).  More on that later.  First let us summarize the key points from Fed’s statement.

 

Striking a more sombre note, the Fed in December recognizes the likelihood of a slowdown in growth in 2019 in the midst of trade tensions, a strong dollar (hitting exports) and the tapering off of stimulus from tax cuts in 2018.  It now forecast a slower growth in GDP in 2019.

 

Key highlights of Fed’s December FOMC statement:

  • The committee now expects only 2 hikes in 2019 and possibly only 1 hike in 2020 to bring the fed funds rate to 2.9% by end of 2019 instead of the earlier forecasted 3.1%, and to 3.1% by end of 2020 instead of the earlier forecasted 3.4%.
  • US GDP will grow 3% instead of 3.1% in 2018, and 2.3% instead of 2.5% in 2019 as forecasted earlier
  • Unemployment rate will be at 3.7% by end of the year. Labour market has continued to strengthen with annual wage increments picking up to 3.1% in recent months
  • Inflation remained subdued with core inflation (exclude volatile energy and food prices) expected to rise only marginally from 1.8% to 1.9% by end 2018 and to hit the 2% target by end of 2019

 

Perhaps the best indicator of the new more dovish Fed’s stance is encapsulated in Fed Chair Powells’s remark that “I do think (low inflation) gives the committee the ability to be patient going forward”.  This signals a Fed that is prepared to look at changing data trends and makes its forecast and adjustment accordingly instead of following a fixed trajectory on planned number of rate hikes.

Compare All Latest Rates 2018

 

Here in Singapore, what we noticed in the last hike by US Fed on September 27, 3-month SIBOR rate moved up by about 15 basis points (or 0.15%) within a week from 1.63% to 1.76%.  The same could very well happen again, or within a short period of time.  What we are not too certain is how high will the benchmark 3-month SIBOR rate ises to this time – will it cross the all-important 2% psychological level? Or would it just stabilize near 1.90%?

SIBOR rate singapore vs fed funds rate

 

Either way, as SIBOR is a benchmark mortgage loan peg, after adding the bank spread, the final floating rate interest homeowners would have to get used to paying in 2019 would certainly be over 2% for most.  In fact, barring a near-term recession, we are expecting interest rates in Singapore to stabilize at slightly above current levels, ie. between 2.20% to 2.50% for most parts of 2019.  And fixed rates would be even higher at 2.50% to 2.80%.

 

At such elevated levels not seen in Singapore for over a decade, there will be much resistance from homeowners looking to refinance in 2019.

 

So, before the year is over and while everyone is still busy with all the festivities, it does pay to do a quick check on your current mortgage contract – those with lock-in expiring before August 2019 should take action now and contact us for a review of your mortgage refinancing options.  At this moment, we still have fixed rate home loans for private properties starting from 2.30%!

 

Before another fresh round of rate hikes by lenders in Singapore when we come back in January.

 

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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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.

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

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.

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

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:

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

 

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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predict interest rate movement

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%.

Compare All Latest Rates 2018

 

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.

Compare All Latest Rates 2018

 

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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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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OCBC and UOB hike FDR and OHR

More Interest Rate Hikes..

With SIBOR rising significantly this year (3-month SIBOR 1.629 as at 26 July), it seems every other month, some banks will be adjusting their mortgage interest.  So let me just say this is not peculiar to UOB and OCBC who are the latest to announce hikes to selective tranches as follows:

 

BankMortgage Peg*Date*Old RateNew RateIncrease By
OCBC36FDMR2 Aug0.650.950.30
OCBCOHR16 Aug1.001.300.30
UOB15FDPR27 Jul0.250.700.45
UOB14FDPR27 Jul0.250.600.35

* Note: This is indicative date based on information we gather on best effort basis, which might differ slightly in some instances especially for OHR which is not published on the website.  The dates shown might be announcement dates or effective dates as some banks announce the hike much earlier.  As most banks need to give at least a one month notice in writing to customers, these might or might not be the exact date where their mortgage repayments would be revised.

 

As a responsible mortgage blog, we have a duty to keep the market informed of all the latest interest rate revisions from all lenders in the market.  Follow this blog to stay abreast of interest rate trends.

Strictly speaking, OHR is not an FDR (Fixed Deposit Rate) home loan mortgage peg but more like a BOARD rate, but we are tracking it just as well as that has been the pre-dorminant loan peg for OCBC in the past year, but is now no longer in the offering.  We track it also because it remains a singular mortgage peg as far as we know, unlike conventional BOARD rate which has reference quote based on dates range hence any subsequent revisions by batches (depends on which period one signs up) remains elusive to the public.

Compare All Latest Rates 2018

 

With the US Fed indicating two more hikes this year (increased from 3 to 4 after the Jun FOMC) with one looming just ahead next month in Sep, indeed we have been warning for a while now that this current uptrend might just be different from the “false alarm” back in 2016.  Already 3-month SIBOR has exceeded the last peak of 1.25% reached in Apr 2016 by a significant margin.  Nothwithstanding the risk of the current spat between US and China ballooning into a full-bloom global trade war and derailing economic growth, the consens is that SIBOR should continue on its upward trajectory.  At MortgageWise, we maintain our forecast that it would hit 2% before end of the year.

Those who are out of lock-in might want to consider switching to a fixed rate home loan quickly while there are still handful of sub-2% packages in offer.  Speak to your current bank first for a good repricing offer, then contact us for a lowdown on all the available packages in the market fixed and floating. We can help you make an informed decision quickly, with our arsenal of interest-tracking tools (since 2014), interest simulation showing you how much you stand to save and the costs involved, not to mention our Zero-Cost Refinancing promotion which we just rolled out in May this year.  Seize it.

 

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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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.

Compare All Latest Rates 2018

 

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?

Compare All Latest Rates 2018

 

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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US Fed

Fed Hikes And Ups Forecast To 4 This Year

US Fed hiked the federal funds rate to a range of between 1.75% and 2% after its 2-day FOMC, which has already been factored in by the market.  What is a little surprising but not totally unexpected is an upward revision of its forecast from three hikes to four this year.  This means we would see two more rounds of rate hikes after its FOMC in September and December later this year.  This would bring the funds rate to a range of near 2.5% – a whisker away from its long run market-neutral rate of 2.9%.

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“Economic activity has been rising at a solid rate,” said the Fed, a positon that reflects the overall sentiments from committee members who believed that the tax cuts and a tight labour market would spur wage gains and drive inflation further up this year.

Other key highlights from the Fed statement:

  • GDP forecast for 2018 is raised slightly from 2.7% to 2.8%
  • Unemployment to drop to 3.6% by year-end
  • Forecast core inflation to rise up from 1.8% to 2% by year-end
  • Ups forecast of rate hikes from 3 to 4 this year, but maintains forecast of 3 rate hikes in 2019

We see US Fed here showing a resolve to normalize rates and move it quickly up to the longer run forecast of 2.9% by 2019 before it moderates the pace of rate hikes.  This is so as to “get ahead” of any inflation over-runs later which would require aggressive hikes to bring it under control and hence trigger a hard landing.

At the start of the year when most analysts are forecasting 3-month SIBOR (Singapore Interbank Offer Rate) to hit 1.7-1.8% by end of the year, we forecast it to break 2% barrier.  That was based on a scenario of 3 rate hikes from Fed.  With an additional hike in 2018 now, we seemed to be on track for our SIBOR year-end target.  3-month SIBOR is now at 1.51% (as at 6 Jun).

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After June FOMC, we now maintain our forecast that SIBOR will cross 2% by end of 2018 and in-line with US Fed’s forecast, we raise our forecast for the total of number of rate hikes this year from 3 to 4.

If we are right again in our forecast this year, what this means is that by 2019, the prevailing interest rate for mortgages in Singapore would go up to around 2.2% with fixed rate going up to around 2.3-2.5%.  This creates an opportunity now for homeowners to act quickly to lock down fixed rates still hovering in the 1.75-1.80% range, but not for very much longer.

And there is no better time than now to do a quick review of your mortgage and refinance to the best fixed rate package out there with our newly-launched Zero-Cost Refinancing programme.  As long as your loan is above $500,000, and the property valuation is up to $1.5M we will make it absolutely zero “out-of-pocket” expenses when you make the switch, provided of course that there is interest savings to be reaped.  Finer terms and conditions apply and do check out more details here.  Even for those with bigger units and higher valuations, the additional costs is usually $50-$200 for most.

Speak to our very experienced mortgage consultant.  Take action today, especially those who will be out of lock-ins within the next 6 months.

 

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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Mortgage Loan In Singapore

Fed Funds Rate Rises To 1.75%

US Fed has hiked the funds rate to a range of between 1.50% and 1.75% in its latest March FOMC but the market heaved a sign of relief as it kept to its forecast of a total of three hikes this year.  It has, however, raised the forecast number of rate hikes in 2019 from two to three.

In the words of the newly-installed Fed Chief Jerome Powell in his first press conference after the meeting, “We’re trying to take that middle ground on rate hikes, boosting rates enough to head off an eventual spike in inflation without derailing the economic expansion.”

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This summarizes the position the Fed has taken as it detected no significant pickup in inflation as yet which continues to run at below the Fed’s 2% target and is expected to move closer to the target only sometime in 2019.  It expected core inflation which strips out volatile food and energy prices to move up from 1.5% to 1.9% by end of 2018.

Other noteworthy observations released are as follows:

  • In line with its forecast of 3 hikes in 2018 and now also in 2019, the target Fed funds rate will rise to 2.1% and 2.9% by end of 2018 and 2019 respectively.
  • It revised GDP growth forecast for this year from 2.5% to 2.7% in apparent recognition of the fiscal tax stimulus passed by Congress late last year. Likewise, it adjusted up the growth forecast for 2019 from 2.1% to 2.4%.
  • It cites a brighter economic outlook with the US economy at the healthiest ever since the Great Recession of 2008, although it noted some moderation in both consumer and business spendings from the highs of Q4 2017.
  • Still, the Fed noted jobs gain in the market in recent months has been strong as the economy added more than 200,000 jobs in January and a solid 313,000 jobs in February. It now expects unemployment to fall further to 3.8% by end of 2018.
  • Fed Chief also commented on the recent tariffs on steel and aluminium imposed by the Trump administration that “There’s no thought (among Fed policymakers) that changing trade policy should have any effect on the current outlook”. However, Powell cautioned that things might be different should the current trade conflict escalates significantly.

 

Overall, the tone set in this FOMC is that of a more confident Fed with regards to economic expansion in US thanks largely I think to the additional fiscal boost from Trump’s tax cuts.  It also affirmed the pace of rate hikes for 2018 will be unchanged.

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At MortgageWise we are keeping to the same forecast of 3 hikes in 2018 for now but I think do not dismiss the possibility of a fourth hike as the tax cuts were just implemented in February and it takes time to filter through the economy with many US corporations still looking at how best to deploy that extra savings.  As I have said before, when labour market tightens further with hiring and retaining of talent coming to the fore, there should be increasing wage pressure which will likely push inflation along at a faster pace.  Inflation has been a conundrum for Fed for many years now and any slight indication of a pickup towards end of the year will push Fed to act more decisively.

Here in Singapore, with the lastest hike in the Fed funds rate to 1.50% – 1.75%, SIBOR (3-month) will likely start moving back up to the 1.50% range over the next few months as there is a strong correlation between the two.  Already it has started moving from 1.12% to 1.37% last month in the run-up to this FOMC.

What this means is that cost of funds is going up across the board for lenders and borrowers.  And it will be even more costly to offer fixed rate mortgages.  Will prevailing fixed rates finally rise beyond 2% by middle of the year?  This is a very likely scenario.  Back in 2016 after US Fed’s first historical hike in Dec 2015, the market got into a bit of frenzy as fixed rates started shooting above 2% for a brief few months before a sudden reversal in 3-month SIBOR from 1.25% back to 0.87% sent fixed rates tumbling down again. Back then the softness in interbank market is caused by a sluggish Singapore economy being hit by a meltdown in oil & gas sector leaving the banks stashed with too much funds to lend out.  And the other biggest difference between the 2016’s spike in rates and the current one is this – US Fed did not hike rates anymore for the next 3 quarters until 2016 Dec FOMC, leaving the funds rate at near 0.25%-0.50% for the whole of 2016.  This time round, Fed has moved up significantly four more times in Mar 2017, Sep 2017, Dec 2017 and the latest Mar 2018 with funds rate rising from 0.50% to 1.75%!

That is why lenders across-the-board have acted decisively to hike FDR pegs last month.  We do not see how a reversal in rates could repeat itself like in 2016.  And if we are right in our analysis, then this could really spell the end of an era of sub-2% fixed rates, possibly by middle of the year.  So, for those with renewals (of mortgages) coming up soon, do quickly contact our consultants while we can still offer you 3-year fixed rate home loans at 1.80%, 1.80%, 1.85%!

 

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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