At the start of this month December, HSBC soft-launched its new FDR home loan peg which it named as TDMR (Time Deposit Mortgage Rate) but it has since been made available to all existing as well as new customers. It has chosen the 24-month time deposit tranche to start with, or TDMR24, currently at 0.65%.

This move by HSBC is greeted with much joy here at MortgageWise, not because there is yet another bank onboard FDR home loans giving more options to homeowners in Singapore, but that it sends a very strong message that HSBC is finally back to compete seriously in the home loans market in Singapore which it sort of exited for a long period of time until it became locally incorporated last year. With this move, it signalled its intention to be a force to be reckoned in mortgage business, and rightly so being the “World’s Local Bank”. It will be quite inconceivable for it to compete in Wealth business in Asia without a competitive home loan portfolio when real estate is such a big part of Asian’s wealth.

Any move that introduces more free market competition which brings about more choices for consumer should be embraced, especially in the area of mortgages – one of the highest expenditure items in a lifetime next to the property itself, cars and perhaps health & insurance costs. That is why we always make it a point to ask clients to support new foreign lenders who come into the market. Their success will ensure we keep incumbents in check so that the common interest of the market is protected. We all have a duty to ensure that. There are so many case studies to exemplify this point. Over the past decade where we have seen airfares, roaming charges, and even taxi fares gone down because of greater competition from Uber/Grab, forcing businesses to innovate, streamline their processes and pass the cost savings back to the consumers. The latest example I can share with you is to look at how private serviced office rentals have come down tremendously up to 35-40% going by my estimate, with the plethora of co-sharing office players into the market, some are global names like WeWork we have read in news in recent weeks.

Let’s now look at how HSBC TDMR package stacks up against the rest of the players:

In fact, HSBC initially launched its TDMR package at 1.45% for the first two years, but which they have since moved up last week as most banks have already adjusted their rates even before US Fed’s rate hike decision last week which has already been factored into financial markets. As one can see from the table, the prevailing floating rate is at 1.60-1.70% range which is about a 20 basis point jump from previous month. Incidentally two other banks have also made a switch on their FDR loan peg tranches recently with SCB moving to price home loans from its 48-month (0.50%) to 9-month (0.30%) and UOB from 15-month (0.25%) to 14-month (0.25%). What this all means is that lenders are taking measures to ready themselves for a rate hike with SIBOR looking likely to ascend further going into 2018. Cost of funds is up for everyone.

We laud the move by HSBC as their suite of home loan packages is now complete and competitive with the full range of options available to homeowners be it 2-year fixed, 3-year fixed, floating on SIBOR, and floating on FDR home loan – the darling of the mortgage market in the last few years. In fact they have the most aggressive pricing for fixed rates in the last quarter of 2017. Offering the full suites of mortgage packages signal their intention to compete seriously for market share with the big boys in 2018 which makes for an exciting year ahead. And this cannot come more timely as US Fed has signalled no letting up of its forecasted pace of 3 more hikes next year, which means the interest rate is likely to head north for the next few years barring another recession.

How should homeowners choose between fixed and floating FDR packages going forward? There are at least six factors to consider which we will cover in more details in upcoming articles, so stay tuned to this blog. Meanwhile there is just one last 3-year fixed rate home loan package going below 1.70% and a handful left for 2-year fixed at 1.60%. Do not miss this chance to lock down your interest rate especially if your current home loan package lock-in expires in the first half of 2018. Speak to us today to find out how you can best position yourself in this new interest rate environment. Before you refinance home loan, start a relationship with a trusted mortgage professional today!

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.