We have reported extensively on all rate adjustments by lenders in Singapore in the past year, being one of the top “go to” site for the latest home loan rates and all things on mortgages.  Last year 2018 ended with major across-the-board rate hikes by DBS (13 Dec 2018) and similarly by OCBC (announced in Dec but takes effect 16 Jan 2019).  It is therefore no surprise that, firing the first salvo in 2019, UOB is the last of the three local banks to play catchup on rates.

We have noticed UOB’s published fixed deposit rates, to which their mortgages are tied to in the past (FDPR), have gone up this month in February although home loan customers have yet to see any increase to their monthly repayments as the bank would need to give a 1-month notice and letters would be going out soon:

Bank	Mortgage Peg	Old Rate	New Rate	Increase By	Effective Date
UOB	36FDPR	1.00	1.65	0.65	25 Mar
	15FDPR	0.70	1.40	0.70	25 Mar
	14FDPR	0.60	1.15	0.55	1 Apr

By the time the new rates take effect, the first quarter of 2019 would have nearly passed.  UOB home loan customers would have enjoyed the longest delay to rising interest rates given how SIBOR has moved up significantly since the last rate hike by US Fed after December’s FOMC (1-month SIBOR rising from 1.63% to 1.82% and 3-month SIBOR from 1.76% to 1.95%, as at 13 Feb).

As UOB has now switched to offering mortgages in SIBOR or BOARD rates only, new customers to the bank are not affected, although we do not track any increases to BOARD rate which is internal to the bank.

Now that the three local banks, who collectively command more than 80% share of the local mortgage market, have announced widespread rate increases, we should expect foreign lenders to follow suit.  In fact, we know one foreign bank has made the announcement which we will be reporting in the coming month.

Another interesting observation is that even amongst the three local banks, the increases were uneven.  On DBS home loans, the bank made the first move in December but with the least average increases of only 0.15%, whereas both UOB and OCBC home loans adjusted on the average by 0.50-0.60%.  In a way we think, this exemplifies the difference in cost structure (and hence cost pressures) between DBS and its two local counterparts, a point we have always highlighted in the past – DBS enjoys cost advantage with access to its huge CASA (current account, savings account) base of POSB accounts for cheap Sing dollar funding.  We speculated that this could also be the primary reason why both UOB and OCBC de-linked their mortgages from pegging to fixed deposit rates since last year.

Having said that, it is not inconceivable that DBS might make another move within the next six months in a “2-step” adjustment to level up with the market.  After all, its last increase at 0.15% was less than one-third of the other two local banks’ increases, and it was made even before Fed’s rate hike in December, which means it may not have factored in the latest run in SIBOR rates.  Another imperative for the bank to move again is that with US Fed likely to pause in rates hikes at least for first half of 2019, this could be the last opportunity for the bank to increase its NIM (net interest margin) against a backdrop of slower loans growth in 2019.

We cannot be 100% accurate in our prediction and forecast.  However, being an active participant in the mortgage industry tracking all news affecting interest rate, we make the best calculated guess and dispense what we believe is best advice for our clients at all times. And right now, as we approach possibly end-cycle over the next few years, there is a shift in our stance for mortgage recommendation.

Speak to our consultants today to find the best home loan.  Plus, you get the best deal here at MortgageWise with our $150 Valuation Fee Offset for refinancing as well as a special $1,800 Legal Fee (includes stamp duty) for buying your Singapore condo, both subject to min loan of $500,000.

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.