DBS branch singapore

DBS Hikes FHR Home Loan Rates

DBS home loan rates are set to rise again.  The bank has just announced on its website increases on fixed deposit rates thereby raising FHR (fixed deposit home rate) for its mortgage customers.

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DBS FHR rises 2019

Source: DBS website

Here’s a closer look at the increase on FHR tranches for DBS home loans:

BankMortgage PegOld RateNew RateIncrease ByEffective Date
DBSFHR80.6750.950.2754 Mar
FHR90.951.350.404 Mar
FHR181.101.400.304 Mar
FHR(Ave12/24)1.0751.400.3254 Mar

The move comes as no surprise for us as we see this really as a follow-up of a 2-step rate hike by the bank who last moved by about 0.15% on 13 Dec 2018.  We have anticipated another increase from DBS after both its peers OCBC and UOB moved by a much bigger margin of average 0.60% in recent months.  The good news for DBS home loan customers is that, even with the latest move the total average increase on their mortgage rates is the least amongst all three local banks at 0.15%+0.30% or 0.45%.

We think this wraps up this current round of rate increases from local banks which started in December following the last rate hike from US Federal Reserve.  There may still be one or two more hikes from foreign banks but we do not expect further increases from local banks for at least the next six months.  Beyond that it really depends on Fed actions in 2H 2019 and we are forecasting two hikes.

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Still that does not mean that SIBOR is going over the roof in the next few years.  We sense some panic out there where homeowners may scramble to lock down fixed rates at 2.50% or higher.  Although no one knows for sure which is a better move – fixed or floating, certainly the risk of holding on to the ball (high fixed rate) when the music stops is much higher now, when compared to those who locked down fixed rates at 2% and below earlier.  We need to keep a cool head and put things in perspective.  Would US Fed continue to hike at the same pace of 9 hikes over 3 years (since Dec 2015) to bring the fed funds rate from the current 2.50% to near 5%? And doing that without crashing first the stock market and to trigger a recession?

Speak to our consultants who can share with you more our views on fixed versus floating rate, and how to better rein in on interest costs.  If you prefer the peace of mind that comes with a higher fixed rate home loan, we may have a better idea for you as well.

To help manage interest costs, here are 3 good ideas we share with you:

1. Consider Interest Offset Account

We have explained what is an interest offset account in one recent article.  Find out more how SmartMortgage works.

Now with rising interest rates, this loan feature takes on greater significance.   Most of us would just leave all our liquid funds scattered over in many places – multiple savings accounts with different banks, stock trading accounts, etc., when what we really should be doing is to consolidate all our funds in one place to “prepay” the mortgage without really prepaying it.  This means you service a smaller loan while your funds are waiting to be utilized or simply parked for rainy days.  The more so when mortgage rates are now going above 2% p.a.  For example, interest offset accounts that pay up to 70% of the deposits you put in is like giving you an interest of 70% of the current mortgage rate at 2.1%, ie. above 1.47% p.a.  This may not be higher than fixed deposit rates in the market but it certainly beats interest from all the other savings accounts out there.  And you have full access to your funds whenever you need it, unlike parking in a fixed deposit.  You put your idle funds to better use this way.

We certainly hope more banks would roll out similar interest offset accounts going forward.

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2. Stay Open To Creative Mortgage Solutions

Here at MortgageWise.sg, we have helped clients unlock new ways of looking at mortgages, going beyond just the traditional fixed or floating rates.  We need to stay open to new ways of reducing mortgage interest costs and how we could structure the loan for maximum benefit.  And we can prove to you it works.  Just to exemplify what we mean, here’s one of the easiest ways that many are not aware – a combo loan can help to bring the average interest rate down, while retaining the benefits of a fixed rate home loan and that of a lower floating rate, at the same time.

Review your home loan with us today.

3. Work With A Mortgage Consultant

Still think that going direct to the banks works better and cheaper because the bank needs to pay us brokers a fee?  While that may be true at times when you work with brokers who do not reveal to you “direct-to-bank” packages, like some of DBS home loans marketed online.  We do. We tell you everything and ask clients to go ahead and check directly with the banks if they like.  Because we want to work long term with all our clients and we seek to earn their trust.

Not only do we call you earlier to refinance home loan, so you do not need to pay higher interest for any extra day, you enjoy special privileges just by taking the same home loan package through us – for refinancing we give a $150 Valuation Fee Offset, and for purchase enjoy a special rate of $1,800 Legal Fee (includes stamp duty & gst), with both subject to min loan of $500,000.  So speak to our consultants today for the best home loan deal!

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.

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