[WASHINGTON] The US Federal Reserve will not need to cut interest rates soon if the world's largest economy continues on its current path, a voting member of the Fed said Tuesday.
The remarks by Eric Rosengren, head of the Boston Federal Reserve Bank, came two weeks before the central bank is due to hold its next policy meeting.
Should steady growth, strong consumer spending, low inflation and wage increases persist, "then in my view no immediate policy action would be required," Mr Rosengren said in a prepared speech.
Markets overwhelmingly expect the Fed to cut rates later this month for the second time this year as recession indicators begin to flash red and the global economy slows amid President Donald Trump's grinding trade wars.
Last month, Mr Rosengren and Kansas City Fed President Esther George were outvoted by fellow members of the Federal Open Market Committee, which cut interest rates for the first time in a decade.
In his speech, Mr Rosengren said that, while risks for the US economy were rising, "to date, these elevated risks have not become reality."
Unemployment is low, GDP growth remains steady around two per cent and inflation is below the Fed's target, Mr Rosengren noted.
Meanwhile, Mr Trump's trade wars had hit stock prices and was weighing more heavily on other, more trade-dependent economies in Asia and Europe, according to Mr Rosengren.
The inversion of the so-called yield curve - a widely cited recession indicator that has generated alarming headlines in recent weeks - was likely less frightening than it looked, he added.
US Treasurys may have become increasingly attractive to foreign investors as the rest of the global economy slows, helping drive down yields, according to Mr Rosengren.
"As a result, this is a particularly good time to carefully watch incoming data to determine whether any policy adjustments are necessary," he said.
The Monetary Authority of Singapore (MAS) is making the big pivot from SOR to SORA. For those of you with SOR loans (to buy property), this may interest you. For the rest, you can talk about this in a coffee shop and look smart as hell.
What is this “SOR” thing anyway?
The Swap Offer Rate (SOR) is a Forex implied rate, which is used to determine interest rates on certain loans.
Are you still reading? Good, you have more stamina than 80 per cent of the students in first year finance. Anyway, this matters to property because, right up till 2017, it was possible to find home loans pegged to either the Singapore Interbank Offered Rate (SIBOR), or Swap Offer Rate (SOR).
SIBOR reflects the rates at which local banks lend to each other, whereas SOR is based on the exchange rate between the Singapore dollar and US dollar. But they both worked the same way for property loans – the interest rate was derived from adding the bank’s spread (the bank’s charges) to the prevailing SIBOR or SOR rate, depending on what sort of loan the borrower used.
But we stopped using SOR due to volatility
SOR and SIBOR move in tandem, but SOR sees bigger increments and decreases
SIBOR and SOR actually move in tandem (e.g. when one goes up, the other will as well). However, SOR would move up or down in bigger increments than SIBOR. This made the interest rate on SOR-based loans more volatile.
The upside was that, when interest rates went down, SOR rates went down a lot more than SIBOR loans. But given that interest rates began to rise again, SOR fell out of favour. Today, no bank currently offers SOR based loans for residential property; SOR packages exist only for commercial real estate.
But there is some impact still, when SOR switches to SORA
Some borrowers – including home owners – may still be holding on to their SOR packages. For example, for a brief time we saw the emergence of hybrid SIBOR / SOR loans, in which the interest rate was pegged to the average of the two.
Borrowers who adopted such SOR – related packages are still affected by SOR rates; and the coming transition could impact them.
This transition will see the switch from SOR to the Singapore Overnight Rate Average (SORA) as the benchmark. SORA is the weighted average rate of all overnight cash transactions brokered in Singapore, between 9am and 6.15pm. This is necessary due to changes in the London Interbank Offer Rate (LIBOR), which contributed to determining SOR rates (LIBOR is dropping the US dollar in its computation methodology).
In practical terms, this could translate to a little less volatility, as the strength of the US dollar is less of a direct factor. But even with the switch to SORA, the rate is likely to be more volatile than SIBOR, or the increasingly popular Fixed Deposit Home Rates (FHR loans) offered by banks.
Home owners who still have SOR-based packages should consult an independent mortgage broker
Still holding on to your SOR loan? Time to consult a mortgage broker.
If you’re still holding on to a SOR package, we suggest you speak to a mortgage broker; check out the various home loan comparison sites, most of them can help. Your mortgage broker can explain the impact on your monthly payments.
We expect most of you will be advised to refinance if you can, given the rise of more consistent alternatives like FHR loans.
Okay be honest: how many of you switched off three minutes into the whole “why you should refinance” spiel by the mortgage broker / banker? Great, the three of you who paid attention can skip this article. The rest of you, you might want to take note of how refinancing into a cheaper loan can go wrong:
1. Refinancing, and then selling before they really see any savings from it
Refinancing, like most things involving a bank, isn’t free. There’s a conveyancing fee of between $2,500 to $3,000, and some banks will stick you with other fees as well, like making you pay $500 for a valuation.
Now if you’re intending to sell, you want to make sure you make back the cost of refinancing, plus a little bit extra. So, say you have a loan for $1.125 million, at two per cent interest for 30 years. That means you’re paying $4,158 per month.
If you’re intending to sell, you want to make sure you make back the cost of refinancing, plus a little bit extra.
If you manage to refinance into a package that’s at 1.7 per cent interest, you’re only paying $3,991 per month. That’s a savings of $167 per month. Assuming your refinancing cost $2,500, you would take about 15 months just to break even. Your actual savings only start after that.
So if you intend to sell your house in, say, 24 months, you’re only really saving $1,503. You decide if that’s worth the effort of the paperwork (or get a mortgage broker to do the paperwork for free).
And if you refinance like this, while intending to sell your house in 12 months, email your old school and suggest they fire your maths teacher.
2. Refinancing into a more expensive package
For SIBOR loans, rates are always lower in the first three years, but jump on the fourth. But that’s not a problem right? You can always refinance on the fourth year or later…so you think.
But consider if your loan right now has a “fourth year and thereafter” rate of about 2.2 per cent. You refinance into another loan that’s at 1.7 per cent for the first three years, and 2.4 per cent on the fourth year (because you think when that times come, you’ll just refinance again).
By switching to an apparently cheaper loan, you could find yourself stuck in a more expensive package.
But what if, when the time comes to refinance, you find out all the other rates are priced at way above 2.4 per cent? Remember, home loan rates have been at record low for 10 years now, and it’s unlikely they’ll go in any direction other than up.
By switching to an apparently cheaper loan, you could find yourself stuck in a more expensive package. Think long term, rather than being too quick to jump on cheap teaser rates.
3. Trying to refinance when you wouldn’t qualify under the new restrictions
There are a whole host of restrictions on how much you can borrow these days – such as the TDSR. Now if you got your home loan a long time ago – like in the 1990s or early 2000’s, you weren’t subject to these restrictions. Heck back in the ’90s, a homeless man’s cat could walk into the bank and leave with a 30 year mortgage.
There are a whole host of restrictions on how much you can borrow these days.
When you refinance your loan however, you’ll be subject to all the new restrictions. This could mean your loan tenure will have to be shortened (thus causing monthly repayments to actually go up), or that you can’t even qualify for a home loan under the new rules.
Sometimes, it’s better not to rock the boat. You may want to leave your home loan as is, especially if you were a bit over-leveraged when you first bought the house.
4. Thinking you found the best rate because you used a loan comparison site
When you see a “cheapest flight ticket” online, do you really believe that’s the cheapest ticket? Because we have news for you: it’s 99 per cent likely that someone managed to get an even betterdeal than that, because their cousin / mother / blackmail victim works for the airline.
There are a lot of negotiations that can happen between a broker and a bank, so just call the bank yourself.
The same kind of goes for home loans. We hate to tell you this, but those “cheapest home loans” you find online probably aren’t. A mortgage broker can actually bargain the rates down even further, such as by convincing the mortgage banker to take less of a commission.
There are a lot of negotiations that can happen between a broker and a bank; so think about that before you decide to bypass the broker, and just call the bank yourself. (Sometimes, you may not even get the advertised rate if you call the bank directly – you may need to apply through a certain broker).
5. Start the refinancing with no funds to do it
See point 1. You want to make sure you have about $3,000 or so in funds, before you attempt to refinance. Because there really are people who try to refinance, find they don’t have enough to pay for the administrative costs, and then take a personal loan or credit card to pay the refinancing cost.
This is beyond ridiculous. What’s the point of refinancing from, say, two per cent to 1.7 per cent, when you’re going to a six per cent per annum loan to do it? That’s like selling $10 notes for $8.
So please, don’t end up using a credit card or something to pay valuation fees, etc. when refinancing. Unless you’re going to pay it off in full to avoid the interest, that would just defeat the entire purpose.
This post was written in collaboration with UOB. While we are financially compensated by them, we nonetheless strive to maintain our editorial integrity and review products with the same objective lens. We are committed to providing the best recommendations and advice in order for you to make personal financial decisions with confidence. You can view our Editorial Guidelines here.
At the start of the year, SIBOR-linked home loan packages were seen as a good choice as mortgage rates pegged to banks’ internal board rates, including those pegged to their Fixed Deposit Board Rates, started to rise overall, and the US Federal Reserve had announced that they might cut back on interest rate hikes this year. However, the surge in SIBOR hasn’t really dissipated, and as at mid-March 2019, buyers were looking at interest rates not seen since more than a decade ago.
Fixed vs Floating – Making sense of interest rates
SIBOR-linked home loan package has certainly taken market observers on quite a ride, and many homeowners have opted for a SIBOR-linked home loan package because of its overall rate being lower than non SIBOR-linked packages. But the fact remains that SIBOR will fluctuate and that is crucial to bear in mind.
With the Fed’s decision to halt interest hikes, we spoke to UOB to find out their views on the potential changes in interest rates, and how it can impact customers who are looking to take a home loan. A summary of some of the key House views we have noted are:
SIBOR levels will remain due to current domestic factors,
and any interest rate decline following the pause in rate hike by the Fed Reserve would be limited
SIBOR has been following the US rate increases with minimal volatility, but the low volatility might not always remain
Based on the research team’s view on SIBOR, this could mean greater volatility to a home owner if you are getting a SIBOR linked home loan
According to the UOB Research Team, “we are of the view that SIBOR levels will remain due to current domestic factors looking supportive of it, and any interest rate decline following the pause in rate hike by the Fed Reserve would be limited (should these conditions remain).
SIBOR has been following the US rate increases with minimal volatility, but we are cautious that the low volatility might not always remain given market’s uncertainties and the slowing down of global growth. SIBORs could experience greater fluctuations when domestic conditions respond to unexpected shifts in global growth outcomes.
Thus, based on our research team’s view on SIBOR, this could mean greater volatility to a home owner if you are getting a SIBOR-pegged home loan.”
Getting the lowest interest rate at a particular point in time may not always be the best idea. Instead, it’s important to ask yourself whether you would rather have stability and not have to constantly monitor the listed rates with a Fixed Rate, or if you would prefer transparency in rate movements which you can monitor.
Pros and cons of a fixed vs floating home loan at a glance:
Home loan package
Transparent?
Volatility
Interest Rates
1-month SIBOR-based
√
√
Can be low or high depending on market
3-month SIBOR-based
√
√
(Relative to 1M SIBOR)
Can be low or high depending on market
Fixed rate
√
X
Fixed for first 2/3 years
The above examples show you the pros and cons of the different types of home loan packages, and choosing a package ultimately depends on both your risk appetite as well as your own budgeting. But that’s not all you need to consider when trying to buy a home.
The journey of buying your dream home in Singapore is one that is often fraught with uncertainty and sometimes more than a few obstacles. Selecting your home loan packages is just one of them.
Regardless of whether you are a first time homebuyer or a seasoned one, knowing your way around this can greatly smoothen the journey.
Price and valuation
As a buyer, often our benchmark when it comes to getting the value of the home you are buying would be based on prices available online. These prices often vary and are just indicative prices, so buyers would have no accurate valuation of the property. Sometimes, they might even end up overpaying for a property.
Given that you will most likely have to take a loan for that property, it’s important to get a fair and reliable valuation so that you can get the right loan amount. Try the UOB onlinevaluation tool that not only provides a credible valuation instantly but this valuation is also backed by the bank, and it is free of charge! What this means for you is that you can get a bank loan based on the listed valuation amount, subject to the bank’s terms and conditions.
Getting your loan approved
You might have heard from family and friends that getting your loan approved could take 2 – 5 days.
With UOB Home Solution, that is no longer an issue. They are the only bank in Singapore that allows you to get instant approval within minutes if you apply for your home loan online, or in any of their branches. The online application process has been enhanced to be fast, simple and secure with MyInfo, through which you can receive your in-principle approval almost immediately.
Home buying, now made a lot simpler
As we mentioned, the home buying process can be quite tedious, but with the right tools in your hand, you can get what you really want, which is that dream home, without having to deal with the frustrations or delays that many people in the past have experienced.
From getting the right valuation and understanding what you can afford, to getting your loan approved speedily, UOB Home Solution was created with the homebuyer’s convenience and need for efficiency in mind.
To top that off, you can even benefit from their exclusive online home loan promotion now. You can get a TANGS Gift Card of up to S$1,000 if you apply for a new loan. If you are refinancing your home loan, you will be able to enjoy not only the TANGS Gift Card of up to S$$1,000, but you can also get a legal subsidy of 0.4% of the loan amount (up to S$1,800) to cover your legal fees, and enjoy the flexibility to partially pay down your loan at any time. Terms and conditions apply.
What’s more? UOB has the most flexible 3-years Fixed Rate package in the market today for a limited period only. Speak with a banker today to find out more about this package.
To find out more about how UOB can help you with your home purchase, head on over to the UOB Home Solution page.
DBS's total housing loans fell to S$74.4 billion as at March 31, 2019, down from S$75 billion as at end-2018. It was S$73.5 billion on March 31, 2018.
BT FILE PHOTO
DBS Group Holdings, the nation's largest home loan provider, saw its mortgage book shrink for the first time in years in the first quarter of 2019, chief executive Piyush Gupta said on Monday.
"The negative quarter was the first time in many, many years," Mr Gupta said during the bank's results announcement.
DBS's total housing loans fell to S$74.4 billion as at March 31, 2019, down from S$75 billion as at end-2018. It was S$73.5 billion on March 31, 2018. The Singapore home loans contraction of "half a billion dollars" was due to last year's property cooling measures by the Singapore government, Mr Gupta said.
Booking of new home loans is soft and about half of what was booked from a year ago, he said. DBS is maintaining its home loan market share of 31 per cent.
DBS Group Holdings, the nation's largest home loan provider, saw its mortgage book shrink for the first time in years in the first quarter of 2019, chief executive Piyush Gupta said on Monday.Mr Gupta still expects the 2019 mortgage book to grow as more projects are completed, but he tempered expectations. Instead of an earlier growth estimate of S$1.5 billion to S$2 billion, he is projecting a lower increase of S$1 billion-S$1.5 billion.
Last year's home loan book grew just under S$2 billion, half the pace of the almost S$4 billion expansion in the previous period, he said.
Last July, the government imposed higher additional buyer's stamp duty rates (ABSD) and stricter loan-to-value (LTV) limits on residential property purchases to cool the market.
First-time buyers are not affected by the higher ABSD, but they are hit by tighter LTV limits for home loans. The revised LTV fell to 75 per cent, from 80 per cent previously, so a buyer has to stump up 25 per cent cash, up from 20 per cent.
Higher ABSD - an extra 5 percentage points - applies for second and subsequent homes for citizens and permanent residents while foreigners face 20 per cent ABSD, up from 15 per cent. Home sales dropped 10.6 per cent to 21,657 units in 2018.
The private residential price index declined 0.7 per cent in the first quarter this year, led mostly by the high end segment.
This is the second consecutive quarterly decline according to the Urban Redevelopment Authority last week after the fourth quarter's 0.1 per cent decrease.
Singapore landlords have a lot of holding power, so mortgagee sales aren’t common. The last time it spiked was way back in Q3 2017. But given the combination or rising interest rates and trade tensions, could we see a repeat of the situation in 2019? With each passing day, the answer seems to shift from no way to well…not impossible.
Mortgagee sales could follow higher interest rates
Mortgagee sales were down in 2018, but some dramatic changes may be brewing
There were 157 mortgagee sales listings in first half last year, almost the same as the second half of 2017 (159). Total sales value was a mere $39.6 million, suggesting a low number of high-quantum properties. So far, it all seems muted.
But there’s some possibility of a dramatic change come 2019, and we could see another spike. Here’s why:
The en-bloc frenzy and foreign interest could have mitigated some mortgagee sales last year
Issues in the stock market tend to affect property, after a short lag
China’s economic slowdown
Interest rates are climbing
The en-bloc frenzy and foreign interest could have mitigated some mortgagee sales last year
2017 saw a swift (some might say too swift) recovery in the property market. It was the entire reason for the latest cooling measures, as prices rose around 10 per cent and almost undid 15 quarters of consecutive decline.
There were two key factors at play: the first was the en-bloc frenzy, instigated by Chinese developers muscling in on the local market. You can read more about that in our previous article.
The second factor was the renewed interest among foreign buyers. At that point, Singapore’s Additional Buyers Stamp Duty (ABSD) was not significantly higher compared to other markets like Hong Kong and Australia – in fact, Singapore looked downright cheap compared to Hong Kong, where a bubble was forming.
This resulted in a rush for Singapore properties, which had a mitigating effect on mortgagee sales. When there’s a high demand for your house, it’s a simple matter to sell it – you don’t need to send it up for an auction.
For investors who had made a mistake (especially those who over-leveraged and bought at the peak in 2013), this was a godsend. They were able to make up for their mistake quite easily.
But the situation has now changed. The en-bloc fever is over, and there’s no guarantee of foreign investors still rushing for our property. In anything, a wait-and-see approach has settled into the market; buyers are expecting cooling measures to bite deeper, and bring prices lower.
There’s no longer a queue of eager buyers, waiting for those who need to quickly offload their property. This could lead to more houses being put up as mortgagee sales.
Issues in the stock market tend to affect property, after a short lag
Stock markets aren’t expected to do well, thanks to Sino-US trade tensions and Brexit. This doesn’t have a direct effect on the property market; but there’s a typically a lag of one to two quarters, before a bad equities market starts to also be a drag on property.
But to get down to specifics, investors who take a bad hit in the equities market may be unable to maintain investment properties. This is especially true for luxury properties, which typically have high maintenance and loan repayment costs.
Weakness in the broader economy can also mean private sector cutbacks. That translates to lower housing allowances, or companies choosing not to bring in expensive expatriate workers.
This raises the possibility of high-end properties going untenanted. Overleveraged landlords may not be able to sustain the cost of these properties without rental income.
Shrinking expat allowances are bad news, for luxury property landlords.
China’s economic slowdown
Mainland Chinese buyers have long been a cornerstone of Singapore’s property market. The majority of them buy properties in the range of $500,000 to $ 1 million (i.e. mass-market condos), and they come ahead of even Malaysian and Indonesian buyers.
However, some of these investors bought during the good times, such as in 2013 or in 2017 when it seemed the market was turning. Today however, China’s economy isn’t faring as well. In November, China’s Purchasing Managers’ Index (PMI) fell to its lowest since January 2017, and this is expected to continue as the trade war drags on. This follows weaker credit and consumption growth as well.
Troubles at home could see Chinese investors unable to maintain their assets abroad – particularly those who are over-leveraged (China has a sizeable shadow banking sector, which makes it easy to borrow too much). If things get worse for these foreign investors, we may start seeing their properties here go under the hammer.
Interest rates are climbing
Home loan interest rates in Singapore are historically around 3.7 to four per cent. However, they’ve been below two per cent for almost a decade now, largely thanks to the American Federal Reserve setting its interest rate to zero.
But this was never intended to be permanent: interest rates were artificially lowered to stimulate economic recovery after the 2008/9 Global Financial Crisis. Now, the Fed is steadily raising rates again, in increments of 0.25 per cent.
(It’s not a question of if but when, as prolonged periods of low interest could result in uncontrolled inflation).
Two rate hikes are planned for 2019, and interest rates in Singapore are already higher. The Singapore Interbank Offered Rate (SIBOR) is more than double what it was in 2017.
The rising interest rate makes mortgages more expensive. For borrowers who are already struggling – such as those who overextended before cooling measures and loan curbs – 2019 could be the year that breaks them.
Will we see more mortgagee sales in 2019? Voice your thoughts in our comments section or on our Facebook community page.
When the time comes to buy a home, most Singaporeans go straight for the HDB loan as if on autopilot. It’s only when we’re ineligible for it that we realise that we can take up a DBS home loan, OCBC home loan or UOB home loan for lower interest rates. Wah, rebel sia.
Singapore might fancy itself the financial hub of Southeast Asia… but the truth is, most Singaporeans’ exposure to banks are limited to the big 3 local banks. The competition between them is fierce, but does any one of them have an edge over the rest?
locked rates that last for 2 – 3 years.They are however,more expensive.FLOATING RATESrise and fall with themarket, which can be unsettling for some.Interest rates are lowerbecause of this.CompletedProjectsget both loan options —Fixed and Floating.BTO/ BUCget only floating rates.Banks offer different loan packages depending on the status of your home.
DBS home loan vs OCBC home loan vs UOB home loan packages
Let’s take a quick look at the cheapest home loan packages offered by DBS, OCBC and UOB at the moment (valid as of 21 Mar 2019). These are split into built and unbuilt properties as banks offer different rates and packages for them.
Property status
Under construction
Completed/refinance
Loan type
Floating
Floating
Fixed
Best DBS home loan
FHR 8 + 1.4% (i.e. 2.35%)
FHR 8 + 1.4% (i.e. 2.35%)
2.68%
Best OCBC home loan
3M SIBOR + 0.35% (i.e. 2.29%)
1M SIBOR + 0.35% (i.e. 2.17%), increases by 0.05% or 0.1% every year
2.68%
Best UOB home loan
MR + 1.3% (i.e. 2.15%)
1M SIBOR + 0.4% (i.e. 2.22%)
2.58%
Wondering what the difference between “floating” and “fixed” is? Floating interest rate packages are pegged to moving benchmarks (e.g. “FHR 8” or “MRP” or “SIBOR”) and tend to be cheaper but more volatile. Fixed rate home loans’ interest rates don’t move for the first couple of years, but they’re generally more expensive.
When trying to assess a floating rate home loan, you need to understand two main components of the package.
First, what is the benchmark that the interest rate is based on? You should understand what exactly the acronym refers to, how transparent is it and whether it’s likely to be volatile.
Second, look at how the interest rate is structured. Is the formula the same each year (like DBS or UOB home loans) or does the interest creep up every year (like the OCBC home loans)? You’re likely to be repaying your home loan for a good number of years, so make sure that the rate past the first few years is something you can live with as well.
How volatile is it? Is it a transparent public rate, oris it set at the bank’s discretion?Does the bank increase the spread (e.g. from +0.25% to +0.7%) after a certain number of years?… Both aspects will affect your loan repayments.Benchmark(e.g. SIBOR, Internal Board Rate)Spread(the “0.25%” added to the benchmark)3 monthSIBOR +0.2%FHR 8+1.4%MRP+0.68%
DBS home loans Singapore – lowest interest rates 2019
Property type
Loan type
Interest rate
Lock-in
BTO / BUC
Floating
FHR 8 + 1.4% (i.e. 2.35%)
None
Completed (private)
Floating
FHR 8 + 1.4% (i.e. 2.35%)
2 years
Completed (private)
Fixed
2.68%
2 years
Completed (HDB resale)
Fixed
2.5%
5 years
Given the long queues at DBS ATMs in today’s cashless world, it’s hardly surprising that DBS home loans are a top choice for many Singaporeans.
DBS floating rate home loans have interest rates that are linked to their own fixed deposit rates. In the past, we thought that FD-linked interest rates could be safer than board rates. Where got bank anyhow increase fixed deposit rates for no reason, right?
WRONG. There are no guarantees in banking. In August 2018, FHR 8 was 0.2%, but it has nearly quintupled to 0.95% since!
The one consolation is that the formula for interest rates is the same every year. Of course, that’s only going to be of use if DBS can maintain its fixed deposit rates.
Those financing built private properties can opt for DBS’s fixed rate home loan package where the interest rate is 2.68% for 2 years. But this is higher than what the floating rate package is offering, and you’ll probably want to refinance at the end of Year 2.
DBS is also aggressively chasing the “HDB market”, trying to entice HDB resale flat buyers to switch from their HDB loan to DBS. They have a special 5-year fixed rate package for resale HDB flats at 2.5% p.a. (0.1% lower than the HDB loan), for loans of at least $200,000.
OCBC home loans Singapore – lowest interest rates 2019
Property type
Loan type
Interest rate
Lock-in
BUC (private)
Floating
3M SIBOR + 0.35% (i.e. 2.29%) for 3 years, increases in Year 4
None
HDB BTO
Floating
MBR + 0.45% (i.e. 2%) for 3 years, increases in Year 4
2 years
Completed
Floating
1M SIBOR + 0.35% (i.e. 2.17%), increases by 0.05% or 0.1% every year
2 years
Completed
Fixed
2.68%
2 years
Like DBS, OCBC is also trying to woo the HDB crowd by offering a special package for BTOs. The rate is linked to MBR and is MBR + 0.45% (now 2%) for the first 2 years’ lock-in, and MBR + 0.75% subsequently. That’s significantly lower than the 2.6% HDB loan, but we don’t know what will happen to the rate in the long term.
If you opt for one of OCBC’s floating home loans, you’ll have a choice between two benchmark rates: Either SIBOR or MBR.
SIBOR (Singapore Interbank Offered Rate) is an industry-wide and transparent rate, but it tends to be quite volatile, especially when there’s global economic instability. You’ll need to buffer for that month-to-month fluctuation when planning your cash flow.
MBR, on the other hand, is what’s known as a “board rate”. These are set by the bank are not transparent to the consumer. If you do take a loan pegged to the board rate, you need to be prepared to jump ship if an increase happens. On the other hand, MRP has been quite stable in the past year.
Notice that some of OCBC’s home loan interest rates creep upwards after the first year or two. This is most apparent in the case of the SIBOR-linked completed property package, where the interest rate grows from 2.17% to 2.42% in 4 years (and that’s assuming SIBOR doesn’t increase!).
UOB home loan Singapore – lowest interest rates 2019
Property type
Loan type
Interest rate
Lock-in
BUC (private)
Floating
MR + 1.3% (i.e. 2.15%)
None
HDB BTO
Floating
MR + 1.53% (i.e. 2.38%) for first 3 years, increases in Year 4
2 years
Completed
Floating
1M SIBOR + 0.4% (i.e. 2.22%)
1 year
Completed
Fixed
2.58%
2 years
If you’re planning to finance an uncompleted private property, UOB’s BUC home loan package has the lowest interest of the 3 local banks right now. But since it’s pegged to MR (board rate), you’d better hope and pray fervently that the rate stays stable throughout your loan tenure.
For completed properties, UOB also has the cheapest fixed rate home loan package out of the 3 (2.58% compared to 2.68%).
After the 2-year lock-in period, it goes back to MR + 1.73%. If MR doesn’t increase from now till then, it’s not a bad deal as the interest rate will still remain at 2.58%. In case the interest rate becomes unfavourable from Year 3 onwards, you have the option to refinance your home loan and get a better deal elsewhere.
Conclusion: Which bank offers the best home loan now?
Unless you’re a die-hard fan of DBS and have a tattoo of POSB mascot Smiley the Squirrel on your back, chances are you wouldn’t mind going with any of the 3 local banks. So which do you choose?
Property type
DBS home loan
OCBC home loan
UOB home loan
Under construction (HDB BTO)
FHR 8 + 1.4% (i.e. 2.35%)
MBR + 0.45% (i.e. 2%)
MR + 1.53% (i.e. 2.38%)
Under construction (private)
FHR 8 + 1.4% (i.e. 2.35%)
3M SIBOR + 0.35% (i.e. 2.29%)
MR + 1.3% (i.e. 2.15%)
Completed (HDB resale) – fixed
2.5%
2.68%
2.58%
Completed (private) – fixed
2.68%
2.68%
2.58%
Completed (all types) – floating
FHR 8 + 1.4% (i.e. 2.35%)
1M SIBOR + 0.35% (i.e. 2.17%), increases every year
1M SIBOR + 0.4% (i.e. 2.22%)
Best home loan for BTO: OCBC’s special BTO package which offers interest rates as low as 2% for the first few years. But it’s a floating rate pegged to a board rate, which means the bank can push it up at any time they like.
Best home loan for private property under construction: UOB home loan at MR + 1.3% (now 2.15%). MR is a board rate as well, so the same caveats apply. Also consider OCBC’s SIBOR-linked home loan for greater transparency.
Best home loan for HDB resale: DBS has the most competitive fixed rate for resale flats at 2.5% with a whopping 5-year lock-in period. The other banks do not have special rates for resale flats, so I compared their general fixed rate packages.
Best fixed rate home loan for completed private property: UOB wins at 2.58% instead of the other two banks’ 2.68%.
Best floating rate home loan for completed private property: I picked UOB again because their SIBOR-linked package has a reasonable spread of 0.4% and remains constant, as opposed to OCBC’s SIBOR package which has a creeping-upwards structure.
P.S. A word of caution regarding floating rate home loans
Whether linked to a board rate or SIBOR, a floating rate home loan is only for those with strong constitutions.
Because these rates can give you a heart attack anytime, it’s super duper important to be (a) very savvy about what you’re getting into and (b) know how to refinance.
Ultimate, you might just have to go for the bank that offers you the most flexibility. For example, one that is more generous with free conversions. This is when you’re allowed to switch to another one of their home loan packages, e.g. if the current package interest rate goes up too much for your tastes. It’s a way for them to retain you as a customer.
If you do not have the constitution of an ox, you might like to opt for a fixed rate home loan instead. These packages are a little more expensive, but they do give you (temporary) peace of mind.
Remember that DBS, UOB and OCBC are not the only banks in Singapore offering home loans. Check out the MoneySmart Home Loan Wizard to find out which bank is offering the best deal for your needs.
