Now that local banks are mostly done with rate increases in the past months, foreign banks are expected to follow suit starting with SCB (Standard Chartered Bank) raising its FDR mortgage rates by 0.25% today.

Here’s a closer look at the increases on FDR tranches from SCB home loans:

Bank	Mortgage Peg	Old Rate	New Rate	Increase By	Effective Date
SCB	9FDR	0.65	0.90	0.25	8 Mar
	36FDR	0.97	1.22	0.25	8 Mar
	48FDR	1.10	1.35	0.25	8 Mar

In retrospect, the increases seem fairly reasonable given how the local banks have moved by a larger margin and this is normally what one would expect of a typical rate hike just like in the case of US Fed’s hikes of a quarter percentage point.

It is unlikely to be the last rate hike for the year as we do expect the last few remaining foreign banks who offered FDR home loans (at one point in the past) to move up on their deposit rates.  Just like OCBC home loans and UOB home loans, some of these foreign banks have now stopped offering the pegging of home loan rates to fixed deposit rates and instead switched back to pegging to internal BOARD rates.

At MortgageWise.sg, besides SIBOR rates which we monitor weekly, we can only track any increases to FDR (fixed deposit rate home loans as a category) rates which are published officially on the various banks’ websites.  BOARD rates are difficult to track as they are internal to the banks and there could be more than a single BOARD rate for different tranches of loans signed at different periods – it would be near impossible to track these as a third party.

Due to the spate of increases in FDR mortgage rates of late, we are seeing some people switching back to SIBOR-based home loans which are ranked above the FDR home loans in our ranking charts, in terms of the lowest average interest in the first three years.  This happens as a number of lenders now cut the spreads for SIBOR loans down to unprecendented lows of 0.25-0.35%.  This is like one-third of the typical spreads one would usually expect at 0.50-0.70% in the past.  Why the spreads can go so low is baffling to us and we think the margins are so thin that the banks are not making much money unless they can continue to acquire cheap source of sing dollar funding from retail deposits.  Until it ends, homeowners who like to switch back to SIBOR loans should capitalize on this window of opportunity when banks are slashing spreads to win market share.  It may not last that long as lenders realize price war benefits no one in the long run, except for those few quick-thinking homeowners who locked in the super-low spreads at the moment.  Speak to our consultants to find out which SIBOR loan makes the most sense.

As SIBOR has somewhat stabilized at the current levels of 1.82 for 1-month and 1.94 for 3-month (as at 25 Feb), the bigger question though is the pace of interest rate increases in the 2^nd half of the year and if one should instead lock in fixed rates at 2.50% today.  No one has the crystal ball to unveil interest rates come 2020-2021.  We can only make calculated guess based on our views of US Fed actions (the single most important driver for SIBOR historically, see correlation chart).  Speak to our consultants who can share with you more on our forecast and what else you need to look at when choosing between fixed or floating rate home loans.

Lastly remember to check back at this blog as we continue to report on all rate movements by lenders in Singapore when it comes to FDR home loans.  Work with the team at MortgageWise who not only tracks news and events affecting mortgage rates since 2014, but who calls you early to review your home loan rate. That way you always get to pre-empt any rate increments and lock down the lowest spreads or fixed rates should the uptrend continues.  Not to mention you also receive a $150 Refinancing Valuation Fee Offset, or a special rate of $1,800 Purchase Legal Fee (includes stamp duty & gst) when you choose to take the loan through us, both subject to min loan of $500,000.  Terms and conditions apply.

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.