With the spate of increases in fixed deposit rates in Singapore last year leading to higher mortgage repayments for many homeowners who have chosen to peg their home loan rate to FDR (fixed deposit rate) mortgge pegs from the various banks, I thought it would be timely to take stock as we begin another year.

First, a recap of what is FDR (fixed deposit rate) home loans?  DBS pioneered this unique mortgage peg back in June 2014 when it started pegging the interest rate it charges for its home loans to a pre-designated fixed deposit rate tenure (eg.12-month, 18-month, 24-month) of deposits between $1,000-9,999 published on its website and called it FHR (fixed deposit home rate).  It gained traction in the market after a year and more banks followed suit with their own versions going by different names from FDMR (for OCBC home loan & Maybank home loan), FDPR (for UOB home loan), FDR (SCB) to TDMR (HSBC).  At MortgageWise, we refer to these collectively as FDR home loans and track their movements closely over the years (see our chart).  However, with rising cost of funds, a few banks (OCBC, UOB, Maybank) have pulled the plug on FDRs and replaced them with traditional BOARD rates since 2018.  Currently only the pioneer DBS home loans and two other banks still offer FDR home loans in the market: SCB and HSBC.

Now let us take a look at the many rounds of adjustments to FDR pegs by banks 2018 (in chronological order):

Bank	Mortgage Peg	Old Rate	New Rate	Increase By	Effective Date
DBS	FHR18	0.60	0.80	0.20	1 Feb
SCB	48FDR	0.50	0.90	0.40	6 Feb
MYB	FDMR36	1.20	1.40	0.20	10 Feb
OCBC	15FDMR 48FDMR	0.25 0.95	0.55 1.25	0.30 0.30	1 Mar
UOB	36FDPR	0.65	1.00	0.35	5 Mar
DBS	FHR9	0.25	0.50	0.25	9 May
	FHR (ave 12/24)	0.675 0.35(12M) 1.00 (24M)	0.80 0.60(12M) 1.00 (24)	0.125	9 May
MYB	FDMR36	1.40	1.80	0.40	26 Jun
OCBC	36FDMR	0.65	0.95	0.30	2 Aug
UOB	15FDPR	0.25	0.70	0.45	27 Jul
	14FDPR	0.25	0.60	0.35	27 Jul
DBS	FHR8	0.20	0.50	0.30	24 Aug
	FHR9	0.50	0.80	0.30	24 Aug
	FHR (ave 12/24M)	0.80 0.60 (12M) 1.00 (24M)	0.975 0.80 (12M) 1.15 (24M)	0.175	24 Aug
	FHR18	0.80	0.95	0.15	24 Aug
SCB	48FDR	0.90	1.10	0.20	8 Nov
	9FDR	0.30	0.65	0.35	8 Nov
	36FDR	0.72	0.97	0.25	8 Nov
DBS	FHR (ave 12/24M)	0.975 0.80 (12M) 1.15 (24M)	1.075 0.95 (12M) 1.20 (24M)	0.10	13 Dec
	FHR18	0.95	1.10	0.15	13 Dec
	FHR9	0.80	0.95	0.15	13 Dec
	FHR8	0.50	0.675	0.175	13 Dec
OCBC	15FDMR	0.55	1.25	0.70	16 Jan 2019
	36FDMR	0.95	1.55	0.60	16 Jan 2019
	48FDMR	1.25	1.75	0.50	16 Jan 2019

Note we included the latest hike for OCBC as part of 2018 review as it was announced back in December even though it took effect only in 2019 (this week).

With the many round of increases, it is easy to lose track of the total increases in the year for each FDR tranche so we summarize them below indicating the value at the start and end of the year (including HSBC which make no adjustment in 2018):

Bank	Mortgage Peg*	Value At 1 Jan	Value At 31 Dec	Total Increase 2018
DBS	FHR (ave 12/24M)	0.675 0.35(12M) 1.00 (24M)	1.075 0.95 (12M) 1.20 (24M)	0.40
	FHR18	0.60	1.10	0.50
	FHR9	0.25	0.95	0.70
	FHR8	0.20	0.675	0.475
OCBC	15FDMR	0.25	1.25	1.00
	36FDMR	0.65	1.55	0.90
	48FDMR	0.95	1.75	0.80
UOB	36FDPR	0.65	1.00	0.35
	15FDPR	0.25	0.70	0.45
	14FDPR	0.25	0.60	0.35
MYB	FDMR36	1.20	1.80	0.60
SCB	48FDR	0.50	1.10	0.60
	9FDR	0.30	0.65	0.35
	36FDR	0.72	0.97	0.25
HSBC	TDMR24	0.65	0.65	0.00

The value in bold represents the current value of the mortgage peg.  The increases in the year fluctuates widely from 0.25% to 1.00% so it is hard to draw an average.  The only bank which never adjusted its FDR peg was HSBC with its TDMR24 launched to the market back in Dec 2017.  This means that those lucky few who signed onto HSBC floating rate packages earlier would still be paying around 1.65-1.78% today, even going into the 2^nd year of their loan tenure.  We do however expect one hike from the bank this year in 2019.

To put in perspective, the benchmark 3-month SIBOR has also moved up in 2018 following four rate hikes from the US Federal Reserve to end the year at 1.886%. It seems the banks moved quite quickly on FDRs to level up with the general rise in benchmark lending rates.

Does FDR home loans still make sense?  That depends.  There are couple of factors to weigh in like the outstanding loan amount, pace of interest rate increases going forward, intention of sale of property or to do partial prepayment, etc.  Speak to our team of very experienced mortgage consultants who have assisted thousands of happy clients make that right choice on the type of home loan to refinance to and why.

After all we are the few, or quite possibly, the only mortgage consultancy firm in the industry that tracks both macro events in the financial markets (that impacts interest rate) as well as interest rate movements per se so that we can give that professional and calculated view to our clients.  You may also like to read our general forecast of rate movement in 2019.  And don’t forget you will get a $150 Refinancing Valuation Fee Offset (for min loan $500,000) when you choose to apply for the same home loan package through MortgageWise.  It’s our way of helping clients to defray some of the costs involved in refinancing.  For more in-depth advice and mortgage strategies as we approach end-cycle, contact us today for the best Singapore home loan.

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.