Singapore home loan rates start upward climb

All three local banks raise their rates, and mortgage advisers say more hikes can be expected

Sat, Dec 02, 2017

Siow Li Sen

ALL three local banks have raised their home loan rates as interest rates continue to spike - and mortgage advisers warn of more hikes to come.

DBS Bank, OCBC Bank and United Overseas Bank (UOB), which collectively account for the lion's share of the housing loan market, have increased the interest rates on their fixed-rate and floating-rate packages since last month.

DBS and UOB have jacked up the interest rate on their three-year fixed-rate loans by 10 per cent a year. The fixed-rate packages now sell for 1.85 per cent a year for each of the three years. In October, less than two months ago, the rate was 1.68 per cent.

A DBS spokesman said the bank raised rates "in tandem with market interest rates environment and outlook, in line with industry". Demand for the revised 1.85 per cent three-year fixed-rate loan remains strong, he added.

Most popular is DBS' floating-rate loan, which is pegged to its fixed-deposit home loan rate (FHR) and accounts for nine out of 10 loans sold, he said. DBS floating-rate package charges 1.65 per cent a year. This is made up of a 1.45 per cent spread plus the FHR, currently at 0.20 per cent.

OCBC Bank, which launched a two-year fixed-rate loan package in October, also increased the interest rate to 1.75 per cent a year for each of the two years, up from 1.65 per cent. The first year rate for its floating-rate loan is now 1.60 per cent, a big jump from the previous 1.30 per cent.

Koh Ching Ching, group head of the bank's corporate communications, said: "The revision of our home loan rates is in line with market conditions."

The home loan benchmark, the three-month Sibor or Singapore interbank offered rate, rose sharply this week. It was 1.21 per cent on Friday, up eight points from the previous Friday. The benchmark had been rising for five straight days.

UOB expects the three-month Sibor to hit 1.40 per cent by end-2017, in response to tight liquidity conditions due to seasonal factors plus the likelihood of a third rate hike by the US Federal Reserve this year, in about two weeks.

Darren Goh, executive director of mortgage broker, has been urging home buyers in recent weeks to secure rates for refinancing or new purchases. The advice was extended to clients whose renewals may only come up in early 2018.

In a Nov 30 posting in his blog, he said: "The banks have been slowly and quietly moving up their rates for both fixed- and floating-rate packages since the start of November, hence do take action quickly to lock down good rates for refinancing, or even purchase. Local banks are net lenders in the interbank market and they can see and foretell the trends in the money market before everyone else."

For those looking at cheaper fixed-rate packages, foreign banks HSBC and Bank of China don't seem to have moved their home-loan rates yet. As at Nov 27, the three-year fixed-rate home loans of the two banks have stayed unchanged (see table).

Matthias Dekan, HSBC Bank Singapore, head of customer value management, said: "We review our rates on an ongoing basis to ensure we provide our customers with flexible mortgage options and the right rate to meet their individual needs."