The latest bank to announce an increase to FDR (fixed deposit rate) home loan peg is Maybank – raising its FDMR36 from 1.80% to 2.05% and to take effect on 17 April.
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The last hike by Maybank was almost one year ago back in Jun 2018. With 3-month SIBOR increasing from 1.52% since then to the current 1.94% (as at 27 Mar), and coming after two further hikes from US Fed in Sep and Dec 2018, the calibrated 0.25% seems all the more palatable. In fact, we believe most who signed onto Maybank’s floating rate package two years ago will find their new revised rates to hover at 2.2-2.3%, more or less on par with prevailing FDR floating rates and probably a tad below those whose mortgages are with local banks after the recent round of increases as reported in this blog.
In an interesting move, Maybank Singapore has also re-introduced FDMR36 as a mortgage loan peg – its only tranche of FDR home loans pegged to its published fixed deposit rate of 36-month tenure. With immediate effect this applies to all its home loan packages previously pegged to its internal BOARD rate. Notwithstanding all the recent increases to FDR home loan pegs, we still see this as a positive development as we are a strong advocate of transparency. FDR mortgage loan peg, even though it is set by the bank who can decide to increase it anytime, is still a much more transparent loan peg than BOARD which is impossible to be tracked by third parties.
The bank can increase FDR to expand its interest income, but excessive adjustments without fully justifying such increases can have backlash leading to massive exodus of existing customer base to other banks, which can only nullify the original objective of such a move. As fixed deposit rates are published on the bank’s website, any frivolous hikes will be picked up by industry players and even the press and widely reported. For an overview of all the increases to FDR pegs across all banks in 2018, read our very detailed tracking here.
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Lately we have also observed UOB removing all its BOARD packages since the start of this month. Will the bank also bring back its FDR home loan pegs which it called FDPR (fixed deposit property rate)? It will be interesting to watch this.
We are not privy to the funding and cost structures of various lenders in Singapore. But what we do know is this – foreign banks depend more on fixed deposits than local banks as a longer-term source of funding for their operations. Local banks would have much greater access to retail deposits in the form of CASA (current account and savings account) accounts than foreign banks, especially DBS with its POSB franchise. To this end, it means any increases in FDR home loan pegs would hit the foreign banks’ cost of funds more than that of the local banks.
With this latest development, there are now four banks in the market offering FDR home loans – DBS (FHR8), StanChart (36FDR), HSBC (TDMR24) and Maybank (FDMR36). How the various lenders manage the movement of FDR mortgage pegs in relation to SIBOR, both in its ascent and descent across interest rate cycles, will be key in deciding if it’s worth keeping the faith with FDR.
Work with one of the leading mortgage consultancy firm in Singapore in operations since 2014. Not only do we track closely FDR peg movements and all news on interest rate, we make sure we deliver real value to clients who choose to take their home loan through us be it refinancing (receive a $150 Refinancing Valuation Fee Offset) or a new purchase home loan (enjoy a special rate of $1,800 Purchase Legal Fee which includes stamp duty & gst), subject to min loan of $500,000. Other terms and conditions apply. Speak to our consultants today.
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