DBS, UOB raise fixed rate home loans to 3.5% and beyond
DBS raises its fixed rate home loans to 3.5 per cent while UOB ups its fixed rate mortgages to as high as 3.85 per cent per annum.
A row of ATMs from various banks at Changi Airport in Singapore. (File photo: iStock)
SINGAPORE: Local lenders DBS and UOB on Tuesday (Oct 4) raised their fixed rate home loans to 3.5 per cent and beyond.
A check on DBS' website on Tuesday morning showed four fixed rate packages available, ranging from two to five years. All four are set at 3.5 per cent per annum.
DBS, Singapore's largest lender, had previously removed all fixed rate mortgages from its website, as it conducted a review following another steep interest rate hike by the US Federal Reserve last month.
The same fixed rate of 3.5 per cent also applies to its two-in-one home loans, which allows borrowers to structure up to half of their loan amount in fixed rates and the remainder under a floating rate package.
DBS last adjusted its home loan rates in end-June. Then, it raised the rates on its two-year and three-year fixed rate packages to 2.75 per cent per annum, while scrapping a five-year fixed-rate package for Housing Board flat buyers.
The bank also introduced a new home loan package last week, allowing new and existing owners of HDB flats earning less than S$2,500 a month to take up a mortgage with POSB at 2.6 per cent per annum. This rate is similar to that of a HDB housing loan.
For now, it has kept its floating rate mortgages unchanged, which is pegged to either the benchmark Singapore Overnight Rate Average (SORA) or the bank’s six-month average fixed deposit rate.
UOB, which was doing a similar review and had temporarily ceased its fixed rate offerings on Sep 23, told CNA on Tuesday afternoon that its two-year and three-year fixed rate home loan packages now bear per-annum interest rates of 3.75 per cent and 3.85 per cent, respectively.
This is up from 2.98 per cent and 3.08 per cent previously.
UOB also offers home loans that combine both fixed and floating rate packages. The all-in or blended rate of such a hybrid loan “tend(s) to be lower”, said its head of group personal financial services Jacquelyn Tan.
For example, if borrowers take half of their loan amount on a two-year fixed rate package at the current rate of 3.75 per cent, and the other half on a floating rate package pegged to the three-month compounded SORA at an assumption of 2.09 per cent, the all-in rate will turn out to be 3.27 per cent, she said.
Such a hybrid loan package typically offers a fixed monthly repayment amount for a set period, while also allowing partial loan repayment for the floating rate portion without penalty, Ms Tan added.
“This means that when interest rates rise, customers can consider paying down the floating rate portion of their loan to avoid the incremental interest payments, while their fixed rate portion is protected against rising rates.”
UOB’s floating rate package is pegged to the three-month compounded SORA plus a margin of 0.7 per cent per annum for the first two years, and 0.8 per cent for the third year onwards.
The three-month compounded SORA – a key benchmark used by banks here to price floating home loans – has risen from 0.1949 at the start of the year to 2.0851 as of Oct 3.
“We are continuously monitoring market conditions and will review our home loan packages to ensure they remain competitive,” Ms Tan told CNA in an emailed response.
OCBC has yet to make an announcement.
The bank had said on Sep 23 that it would continue to offer a two-year fixed rate package at 2.98 per cent. But that offering has been removed from its website since early last week.
Central banks around the world have been tightening monetary policy to combat surging inflation.
The US Federal Reserve, in particular, has been on a rate-hike race to combat inflation at its highest in 40 years. Its latest move – a 75-basis-point rate increase on Sep 21 – marks its fifth rate hike this year, with further increases likely, to rein in soaring prices.
Amid this, banks have been making rapid revisions to their borrowing rates and for home loans, fixed rate packages have seen bigger adjustments.
Mr Paul Wee, vice-president of PropertyGuru Finance at PropertyGuru Group, said local banks are likely to continue offering fixed rate mortgages, although rate reviews will be inevitable amid uncertainties in the outlook of global interest rates.
“Banks must cover or hedge their exposures against rising interest rates when offering a fixed rate package. The closer the fixed rates are to the current interest rates, the higher the cost of hedging,” he explained.
“The hawkish stance taken by the US Fed means that it is unclear how high interest rates can go. At this point, the banks are taking time to assess these risks to price their fixed rate products better.”
On the other hand, hedging is not applicable to floating rate packages as the higher rates are passed on to consumers, he added.
Meanwhile, the Singapore Government unveiled a slew of property cooling measures last week, in its bid to moderate demand and ensure prudent borrowing.
The measures, which came into effect on Sep 30, include revised medium-term interest rate floors, a higher interest rate floor for housing loans granted by HDB, as well as a wait-out period of 15 months for private home owners to buy a non-subsidised HDB resale flat.
