Best Ocbc Home loans Guide and Trends - iCompareLoan

BY SI JIE LIM • MAY 29, 2018 • HDB HOME LOAN, REFINANCE COMMERCIAL PROPERTY, REFINANCE HOME LOAN,RESIDENTIAL PROPERTY LOAN • COMMENTS (0) • 298

Homeowners with outstanding OCBC home loans, it’s time to pay attention. For those of you who are first time homeowners, Singapore’s interest rate has a strong positive correlation with the US. This means that as US takes the lead in raising its Federal funds interest rate, Singapore’s interest rate will follow suit. In particular, the Singapore Interbank Offer Rate (SIBOR) and Swap Offer Rate (SOR) has been steadily rising since October 2016.

OCBC Bank Mortgage Loan
Image Credits: OCBC Bank Holland Village, Paul Ho, iCompareLoan.com

Considerations for finding the best ocbc home loans

What Home Loan Rates are other banks offering?

As we enter the cycle of interest rate hike, your decision on which loan package to choose or refinance could make a huge difference. This might be the time to switch out from your current loan to take on a more advantageous loan to reduce the impact of rising interest rates. To help our readers make wiser home loan choices, we have done an analysis to understand the trend of home loan interest rates from OCBC.

Let’s First Understand The Fluidity Of Benchmark Rates

We understand that many of you might be on loan packages that uses SIBOR as the benchmark rate. Among the types of benchmark interest rates, SIBOR is typically the first to be adjusted. It is then followed by benchmark rates that are tied to deposit savings interest rates. This is because of the nature of each benchmark rate.

SIBOR, being the most fluid benchmark rate, changes every day. There are a few types of SIBOR ranging from one, three, six to 12 months. Next in line in terms of fluidity is OCBC’s latest OCBC home rate (OHR), which uses the 12-month moving average of the 1-month and 3-month SIBOR as a reference. Since OCBC home rate uses the 12-month moving average, it is less prone to adjustments.

OCBC’s FDMR and later Home Rates (OHR): Introduced To Rival Its Competitors

FDMR would be third in line in terms of fluidity. Prior to introducing its OCBC home rate (OHR), OCBC had the fixed deposit-linked home rate (FDMR). FDMR loans were replaced by OHR in late 2017. So, if you had taken up a loan prior to 2017, you might still be under loans that are pegged to OCBC’s FDMR. However, after a few years since DBS introduced its fixed deposit rate (FDR) home loans, OCBC is finally introducing its own bank-managed rate to rival DBS’ FDR. OHR allows you to choose between a fixed or floating one, which is similar to DBS’ FDR home loan packages. It appears that OCBC introduced its OHR to make its loan packages more competitive relative to its rivals, especially DBS.

Read also: Best DBS Home Loans and past Sibor and FHR rate Trends

OCBC home loans Trend: Home Loan spread for Sibor Have Been Decreasing

Chart: Sibor Spread from OCBC home loan packages, Si Jie, iCompareLoan.com

OCBC home Loans – Sibor Historical Rates

Date	OCBC Sibor Bank Loan Package	Spread
21-Jan-15	Ocbc 3M Sibor 3 Years Lock In Completed (Min $350k)	0.8
21-Jan-15	Ocbc 3M Sibor No Lock In Special	0.8
26-Jan-15	OCBC 3M SIBOR 3 Years Lock In With Cash Rewards For Refinance	0.85
26-Jan-15	OCBC 3M SIBOR No Lock Completed (Min $350K)	0.85
3-Feb-16	OCBC 3M SIBOR 3 Yrs Lock-In For Private Properties (Min 1M, Deviated Package)	0.8
16-Mar-16	OCBC 3M SIBOR 3 Yrs Lock-In For Private Properties	0.9
29-Apr-16	OCBC 3M SIBOR No Lock-In For BUC Private Properties	0.9
29-Apr-16	OCBC 3M SIBOR 3 Yrs Lock-In For Private Properties	0.9
18-May-16	OCBC 3M SIBOR No Lock-In For BUC Private Properties	0.9
20-Sep-16	Ocbc 1M Sibor	0.58
26-Oct-16	Ocbc 1M Sibor	0.65
26-Oct-16	OCBC 1M SIBOR No Lock-In For BUC Private Properties	0.65
25-Nov-16	Ocbc 1M Sibor	0.65
15-Jan-17	OCBC 1M SIBOR Package – 2 Years Lock In	0.6
15-Jan-17	OCBC 3M SIBOR – 2 Yrs Lock-In For HDB/Private Properties	0.5
15-Jan-17	OCBC 3M SIBOR – 2 Yrs Lock-In For HDB/Private Properties	0.5
15-Jan-17	OCBC 3M SIBOR – 2 Yrs Lock-In For HDB/Private BUC Residential	0.5
22-Feb-17	OCBC 1M SIBOR Package – 2 Years Lock In	0.6
7-Mar-17	OCBC 1M SIBOR Package – No Lock In	0.5
19-Jul-17	Ocbc 1M Sibor – Building Under Construction	0.6
19-Jul-17	Ocbc 1M Sibor – Completed Property	0.55
18-Aug-17	Ocbc 1M Sibor – Completed Property	0.55
18-Aug-17	Ocbc 1M Sibor No Lock In – Building Under Construction	0.6
9-Oct-17	Ocbc 1M Sibor – Completed Property	0.55
9-Oct-17	Ocbc 1M Sibor – Properties Under Construction	0.6
7-Jan-18	Ocbc 1M Sibor No Lock-In – Building Under Construction	0.55

*BUC – Building Under Construction

Overall, we have seen a decreasing trend on the home loan rates across all the types of loans offered by OCBC. The spread on OCBC’s SIBOR loans peaked in first half of 2016. But since its 2016 peak, the spread on SIBOR loans have been decreasing. Right now, OCBC’s latest loans offered in 2018 has one of the lowest spread since 2015. Similarly, OCBC’s FDMR/OHR loans and fixed interest loans also experienced a peak in first half 2016 before declining gradually to its low late last year.

Fixed Interest Rates vs SIBOR-Pegged RatesWhen you were choosing which loan package to sign, you had the choice between fixed and floating interest rates (e.g. SIBOR or OHR). While fixed interest rates might sound like the “safer” option as it removes the uncertainty from your loan’s interest rate amount, the data that we have collected doesn’t reflect that safety.In order to offer you fixed interest rates (and still make money), OCBC has to add an additional buffer to protect its profits. Based on the data, we observe that OCBC home loans has been adding in additional buffer of 0.05-0.1% spread to its fixed interest rates loan compared to SIBOR loans. As such, OCBC’s fixed interest rates continue to be more expensive due to the built-in spread. This is despite SIBOR’s increase since 2016. Unless certainty is really so important to you, our advice is to take on some uncertainty but save some money for yourself with SIBOR-pegged loans from OCBC.

OCBC Home Loans: Should Bargain Hunters be switching out of SIBOR Loans?

If you are currently on SIBOR loans, should you be switching out of them to other benchmark rates? Based on our analysis, SIBOR loan isn’t the best deal you can get among the three types of OCBC home loans. If you really want the best bargain, OCBC’s OHR loan could be the ideal choice.

The US Federal Reserve Central Bank raised its interest rate for the first time in 2016 since the historical low Fed fund rate of 0.25%. Since then, the US Central Bank has been increasing its interest rate to its latest Fed fund rate of 1.5%. If you observe the SIBOR trend, it follows suit the movement of Fed fund rate, albeit not fully in tandem.

Since OCBC’s OHR uses a 12-month average of 1-month/3-month SIBOR, it is less affected by short term movement of SIBOR.  Yet, at the same time, it also enjoys the advantage of the floating SIBOR, especially if SIBOR dips. Moreover, given that we are currently in an environment of rising interest rates, SIBOR is expected to trend upwards. Homeowners that have signed SIBOR loan packages should brace yourselves for a much more volatile ride compared to those who are currently on OHR loan as the Federal Reserve signals more rate hikes.However in May 2018, OCBC emphasised that OCBC Home loans for OHR is not pegged to 12 year sibor rates and has never been, but there were some wordings that were used that seem to indicate that OCBC home loans based on OHR is actually just another board rate and is not pegged to anything except to the cost of funds.

OCBC Home loans – FDMR and OHR Historical Rates

Date	OCBC Bank Loan Packages	1stYear Interest Rate (%)	2ndYear Interest Rate (%)	3rdYear Interest Rate (%)	4thYear Interest Rate (%)	5th  Year Interest Rate (%)	Interest Rate Thereafter (%)
4-Apr-15	OCBC Fixed Deposit Mortgage Rate (FDMR) With 3 Years Lock-In	1.38	1.68	1.88	2.65	3.75	3.75
4-Apr-15	OCBC Fixed Deposit Mortgage Rate (FDMR) With 3 Years Lock-In For Private Properties	1.38	1.68	1.98	2.65	3.75	3.75
30-Apr-15	OCBC Fixed Deposit Mortgage Rate (FDMR) Without Lock-In For Private Properties	1.68	1.98	2.28	2.65	3.75	3.75
18-Jun-15	OCBC Fixed Deposit Mortgage Rate (FDMR) Without Lock-In For Private Properties BUC	1.4	1.5	1.6	2.65	3.75	3.75
22-Jul-15	OCBC Fixed Deposit Mortgage Rate (FDMR) With 3 Years Lock-In	1.58	1.78	1.98	2.65	3.75	3.75
4-Feb-16	OCBC Fixed Deposit Mortgage Rate (FDMR) With 3 Years Lock-In For Completed Private Properties (Refinance)	1.58	1.78	1.98	2.65	3.75	3.75
11-Feb-16	OCBC Fixed Deposit Mortgage Rate (FDMR) Without Lock-In For Private Properties BUC	1.8	1.8	1.8	2.35	2.35	2.35
11-Feb-16	OCBC Fixed Deposit Mortgage Rate (FDMR) With 3 Years Lock-In For Completed Private Properties (New Property)	1.8	1.8	1.8	2.35	2.35	2.35
11-Feb-16	OCBC Fixed Deposit Mortgage Rate (FDMR) With 3 Years Lock-In For Completed Private Properties (Refinance)	1.88	1.88	1.88	2.35	2.35	2.35
11-Feb-16	OCBC Fixed Deposit Mortgage Rate (FDMR) Without Lock-In For Private Properties	1.88	2.18	2.48	2.65	3.75	3.75
15-Feb-16	OCBC Fixed Deposit Mortgage Rate (FDMR) With 3 Years Lock-In	1.63	1.63	1.63	2.15	2.15	2.15
16-Mar-16	OCBC Fixed Deposit Mortgage Rate (FDMR) With 2 Years Lock-In	1.68	1.68	1.68	2.15	2.15	2.15
16-Mar-16	OCBC Fixed Deposit Mortgage Rate (FDMR) With 3 Years Lock-In For Private Properties	1.68	1.98	2.28	2.65	3.75	3.75
25-Mar-16	OCBC Fixed Deposit Mortgage Rate (FDMR) With 2 Years Lock-In	1.88	1.88	1.88	2.35	2.35	2.35
29-Apr-16	OCBC Fixed Deposit Mortgage Rate (FDMR) With 3 Years Lock-In for Private Properties	1.75	2.05	2.35	2.65	3.75	3.75
18-May-16	OCBC Fixed Deposit Mortgage Rate (FDMR) With 2 Years Lock-In For Private Properties	1.7	1.8	2.25	2.65	3.75	3.75
18-May-16	OCBC Fixed Deposit Mortgage Rate (FDMR) With No Lock-In For BUC Private Properties	1.88	2.18	2.48	2.65	3.75	3.75
9-Jun-16	OCBC Fixed Deposit Mortgage Rate (FDMR) With 3 Yrs Lock-In For Completed Properties	1.65	1.65	1.8	1.8	1.8	2.35
4-Mar-17	OCBC Fixed Deposit Mortgage Rate (FDMR) With 4 Years Lock in – For Residential BUC Properties	0.7	0.65	0.6	0.55	1.55	1.55
14-Aug-17	OCBC Fixed Deposit Mortgage Rate (FDMR) With 2 Years Lock-In	1.25	1.25	1.3	1.4	2.25	2.65
18-Aug-17	OCBC Fixed Deposit Mortgage Rate (FDMR) Without Lock-In	1.4	1.5	1.5	1.5	2.25	2.65
11-Oct-17	OCBC Home Rate (OHR) – Properties Under Construction	1.35	1.35	1.4	1.6	1.8	2
3-Nov-17	OCBC Home Rate (OHR)	1.35	1.35	1.4	1.6	1.6	1.6
4-Nov-17	OCBC Home Rate (OHR) – Completed Property	1.35	1.35	1.35	1.6	1.6	1.6

Here is any overview of the best home loans in Singapore.

You may want to check out OCBC OHR home loan structure to understand what it is.

ABOUT THE AUTHOR: SI JIE LIM

Si Jie majored in Business (Actuarial Science) and graduated from Nanyang Technological University in 2017. Si Jie started his journey towards financial independence when he was 18. He wants to help people understand that financial independence isn't just for the rich, but is also attainable by anyone and everyone. His knowledge spans across personal finance, stock investing, property investing and insurance.

Source: iCompareLoan

DBS FHR-9 home loan rates to hike - iCompareLoan

BY PAUL HO • MAY 14, 2018 • MORTGAGE BROKER, PROPERTY MARKET NEWS, REFINANCE HOME LOAN, RESIDENTIAL PROPERTY LOAN • COMMENTS (0) • 4144

DBS FHR-9 Fixed Home Rate and DBS FHR-12/24 – Set to Hike in June 2018

Is DBS FHR-9 Fixed Home Rate really a fixed rate? Fixed Home Rate is not a Fixed rate that is guaranteed to remain the same. Fixed Home rate (FHR) can rise and fall depending on the overall interest rate environment as Fixed Home Rate is based on the fixed deposit rates being offered to depositors. If Sibor rises, the market interest rates rises, hence the bank will need to pay their fixed depositors higher interest rate.

DBS ATM branch – Holland Village

Image Credits: DBS ATM Branch at Holland Village, Paul Ho, iCompareLoan.com

What is DBS FHR-9 and what is DBS FHR 12/24. A short recap.

DBS FHR-9 is based on the 9-month fixed deposit rate. As you already know, the longer the deposit tenure, the higher the interest paid that is paid to the depositors. So FHR-12/24 is based on the 12-month and 24-month average. Hence the FHR-12/24 deposit rate will be higher than the FHR-9 deposit rate.

Chart: Singapore Government Bond Yield Curve, Asian Development Bank

Singapore’s government bond yield curve also indicates that the longer the tenure, the higher the interest rate as you can see from the horizontal axis.

When interest rate starts to hike, we have observed that it is the longer tenure bonds that rises less compared to the shorter tenure bonds.

What this means in layman language is, if you place a deposit in a bank for 36 months and this bank pays you 1%, versus a 9 months fixed deposit at 0.25%. If the interest rate rises by 1% globally, the banks may increase the 36 months fixed deposit by 0.5% from 1% to 1.5% to retain the customer, while the 9 months fixed deposit may be increased by 0.6% to go from 0.25% to 0.85%. The logic is simple, towards a higher tenure deposit (or bond), the deposits (investors), they expect an increase in interest rate, but that increase is not a linear and proportional increase, instead you will see that towards the longer tenure, the interest rates tends to flatten out.

Singapore Banks Increase Margins and Pass on Interest Rate risks?

Banks have increasingly passed on the risk of interest rate fluctuation to consumers. How?

As an illustration (not actual rates): –

Past

If FHR-12/24 = 0.65%, Spread = 1%

• FHR-12/24 + Spread = 1.65%

Now

If FHR-9 = 0.25%, Spread = 1.4%

• FHR-9 + Spread = 1.65%

They are both the same at 1.65%. But look at the spread, the bank has locked in a higher spread. Although each bank’s cost of funds is different, the spread does not necessarily mean it is the margin but it roughly approximates it. If the cost of funds is 0.25%, why not use the 1% spread and price the loans at FHR-9 + 1% = 1.25%?

Hence it would be safe to surmise that banks have passed on the risk of interest rate fluctuation to consumers. In this case, if the FHR-9 is 0.25%, then the likelihood of FHR-9 fixed deposit rate dropping is very low, as it is only 0.25% above ZERO. However the move upwards is more unpredictable and perhaps easily exceed the 0.25%.

This means that the “margin” has increased.

DBS FHR-9 and FHR-12/24 to Hike Rates in early June 2018.

DBS to hike FHR-9 by 0.25% and FHR-12/24 by only 0.125%. You will receive the notice in your mailbox about your revised home loan rates already or soon.

Read about DBS FHR-18 hike in Jan/Feb 2018.

Fixed Deposit Peg	Description	Current	Revised
DBS FHR-9	9 months S$ Fixed deposit	0.25%	0.5%
FHR-12/24	Average of 12 months and 24 month S$ Fixed deposit	0.675%	0.8%

Table 1: DBS to revise Fixed Deposit Peg Rates

In fact we spoke about this in April 2017 about the risk of interest rate hike being passed to consumers and that the likelihood of any interest rate uptrend is incurred by consumers.

As you can see above, the FHR-12/24 increases less than the FHR-9.

The FHR-9 and FHR-12/24 is not longer being offered, the current DBS flavour is based on theDBS FHR-8, pegged to the 8 months Fixed deposit rate.

Those with home loan packages from DBS FHR-9 and FHR-12/24 and FHR-18 could do well torefinance home loans to fixed rates if they feel that the Federal Reserve will continue to hike the interests in the 2018 and 2019 (Fed predicts 7 hikes in 2018 and 2019 in total and each hike ranges from 0.25% to 0.5%).

Bank such as OCBC have moved away from fixed deposit pegged home loans and instead created the OCBC OHR which is based on the 12-year Sibor Average, this smooths out any rise and fall in short term sibor movements. Others may yet consider longer tenured Fixed deposit based rates such as those from Maybank.

If you are unsure, check with a mortgage broker who can work you through. It’s free to you as they receive a standard distribution fee from the bank.

Read the article about DBS FHR here.

https://www.icompareloan.com/resources/dbs-fhr-history-fhr-9-fixed-home-rate/

ABOUT THE AUTHOR: PAUL HO

Paul holds an a B.Eng(Hons) 2nd Upper, Aberdeen University (UK) and a Masters of Business Administration (MBA) from a Macquarie Graduate School of Management (MGSM) Australia. He also serves as President of Macquarie University Alumni Association of Singapore and former Treasurer of Australian Alumni Singapore and Hon. Sec of British Alumni. He is founder of www.iCompareLoan.com, his articles have been syndicated/featured on Yahoo, STproperty, iProperty, BTInvest, Propertyguru, TheEdgeProperty, Propwise, Propquest and TheOnlineCitizen amongst many other sites. Interviewed on Channel 8, 938 Live, Love 972, quoted in South China Morning Post, XinMin Daily, Zaobao, etc. He has also given speeches, guest speeches, trainings and/or seminars with Credit Bureau Singapore, FPAS, Propertyguru Malaysian property expo, NUH Lunch time talk, Far East Launch Talk at Bijou, iProperty, David Poh and Associates, Getty Goh’s Ascendant Asset property, NTU (Guest Lecture on SEO), Panel discussions at GPS Alliance, C&H, Skillup just to name a few. He is passionate about helping people enhance their wealth and in making money work harder for them. iCompareLoan.com also holds trainings for property agents and financial advisors to help them to understand Mortgage Planning so as to facilitate faster deal closure and more holistic financial planning.

Source: iCompareLoan