Last week, DBS replaced its FHR9 tranche for its private property home loans with its latest kid on the block – FHR8 which is the 8-month fixed deposit board rate (for $1,000 to $9,999) currently at 0.20. However, in a slight depart from previous new FHR tranche introduction, it did not stop taking in new loans on its earlier FHR9 for its HDB portfolio, which is still available on its website.
This move come somewhat as a surprise to us as FHR9 was only launched earlier in April this year which gives it just slightly over six months’ time frame for new home loan signups. We have observed that typically the bank takes approximately one and a half year to sign up new DBS home loans on each of its previous two FHR tranches, ie.the original FHR followed by FHR18.
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Once again this affirms our stance that FDR (fixed deposit rate home loan) definition and operation is something of a “black box” to us – it is futile to try and predict whether one bank’s 36-month FDR is more or less likely to rise versus another bank’s 9-month FDR for example, or vice versa. Each bank’s funding and hence cost structure is unique.
DBS was the first bank in Singapore to pioneer tagging mortgage interest to a pre-defined fixed deposit tranche back in 2014 and since then OCBC home loans and UOB home loans followed suit, before finally SCB and then Maybank joined in. Here at MortgageWise, we refer to these home loans simply as FDR home loans (or fixed deposit rate home loans), although different banks call them by different names from FDR itself, to FHR, FDMR, FDPR, etc.
Below is an overview of the latest floating rate FDR packages for the month of November 2017:
In another interesting development covered by our blog here last month, OCBC became the first bank to buck this trend by moving away from FDR altogether in favour of another new exciting home loan peg which it called OHR (OCBC Home Loan Rate). It defined this, not on fixed deposit rate tranches, but rather on the long-term average (over 12 years in its illustration) of two market-determined home loan pegs that the Singapore market is familiar with – the 1-month and 3-month SIBOR (Singapore Interbank Offer Rate). This does take all the guessing work out of which FDR tranche to select (and hence which bank’s package to sign up for), but provided there is only a singular OHR. That is still an unknown. We will be watching this space closely.
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Some might lament that the home loan market in Singapore is becoming increasing more complicated and difficult for homeowners to compare and size up for the best offer on the table. On the contrary we think that the myriad of options in terms of fixed versus floating rate packages, and now the different types of home loan pegs available, ultimately benefits consumers as lenders innovate to stay competitive and grab more market share. Compare that to a situation like five years ago when there were mostly floating rate home loans all pegged to SIBOR and homeowners just need to look at who offers the lowest spread above SIBOR but were dismal to them all level at spreads of 0.80% to 0.90% in the first few years of the loan, and with year 4 spreads going up to as high as 1.25%. With intense competition in the market place since, this spread on SIBOR loans has dropped to as low as 0.22% in the first year now! Speak to our consultants to find out more if you are still very much on the traditional SIBOR peg.
In fact, with complexity of home loan choices and the importance of getting access to maximum loan in a vibrant property market as we head into 2018, it has become more imperative to work with a professional mortgage broker who can help you understand what to look out for before signing on the dotted line. In fact, a good broker brings you much more value than that. Speak to our team of very experienced mortgage consultants today, and access exclusive privileges reserved only for MortgageWise clients from unbeatable legal fees ($1,800 for private condo purchase in Singapore, terms apply) to additional perks and concessions when you refinance home loan.
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.