Fixed home loan rates in S'pore hit 3.85% as UOB makes move after DBS

Home loan rates in Singapore on Tuesday hit as high as 3.85 per cent, a level not reached in many years.

UOB fired the latest salvo in raising home loan rates, launching two-year fixed-rate packages at 3.75 per cent per annum and three-year fixed-rate packages at 3.85 per cent per annum.

The rates are 0.77 percentage point higher than for earlier fixed-rate packages that the bank had withdrawn from the market in late September.

UOB’s rate rises follow DBS Bank’s move this morning to raise the rates for its fixed-rate packages to 3.5 per cent per annum.

Home owners can choose between DBS’ new two-, three-, four- and five-year fixed-rate packages, all at rates of 3.5 per cent per annum, which is 0.75 percentage point higher than the earlier fixed-rate packages from DBS.

To illustrate, a home owner who takes UOB’s new three-year fixed-rate package, with a loan amount of $500,000 and a 30-year tenure, will fork out monthly instalments of $2,344.

This is $214 more than what he would pay with the bank’s earlier three-year fixed-rate package. If the home owner takes UOB's new two-year package, he now pays $2,316 monthly, up $213 from the previous package.

For the DBS package, the same home owner will have to pay $204 more, or $2,245 monthly, if he takes up its two-year fixed-rate package at the new rate of 3.5 per cent.

OCBC Bank has also confirmed that it is reviewing its fixed-rate package. It had earlier taken its two-year fixed-rate package at 2.98 per cent per annum off the table.

A DBS spokesman said the bank reviewed and adjusted its fixed-rate packages in accordance with the interest rate environment. 

The spokesman said DBS is offering longer tenure packages of as long as four and five years to cater to customers who want to lock in a fixed interest rate for a longer period, adding that it will continue to explore ways to provide customers with more stability through its fixed-rate packages.

Ms Jacquelyn Tan, UOB’s head of group personal financial services, said UOB is continuously monitoring market conditions and will review its home loan packages to ensure they remain competitive.

She noted that home owners can also consider taking a combination of fixed- and floating-rate home loan packages, where the all-in interest rate tends to be lower at around 3.27 per cent per annum if borrowers take half of their loan amount on a two-year fixed-rate package and the other half on a three-month compounded Singapore Overnight Rate Average (Sora) floating-rate package.

The rate of 3.27 per cent assumes a three-month compounded Sora rate of 2.09 per cent, as set on Tuesday.

DBS has a similar two-in-one home loan package that allows home owners to take a proportion of their home loan on a fixed-rate package and the remainder on a floating-rate package - in proportions of 50 per cent fixed, 50 per cent floating; 40 per cent fixed, 60 per cent floating; or 30 per cent fixed, 70 per cent floating.

Rates have already surpassed the previous highs of 2.88 per cent hit in mid-2019, said Mr Clive Chng, associate director of mortgage broker Redbrick Mortgage Advisory.

But the current fixed rates from the Singapore banks are still below the medium-term interest rate floor, which was raised to 4 per cent last Friday as part of the Government’s latest set of property cooling measures.

The latest mortgage rates are also below what Singapore home owners had to pay in the 1980s.

Mr Alfred Chia, chief executive of financial services provider SingCapital, said that on the average, rates were like 5 per cent to 6 per cent back then.

During the Asian financial crisis, they even spiked above 10 per cent very briefly, Mr Chia added.

The local banks have not changed their Sora floating-rate packages.

UOB and DBS still have packages based on three-month compounded Sora plus a margin of 1 per cent.

Floating-rate home loan packages in Singapore are computed using one-month compounded Sora or three-month compounded Sora plus a spread.

But, with the daily Sora rates spiking up, hitting past 4 per cent for the first time on Monday, the one-month and three-month compounded Sora rates are likely to climb.

On Tuesday, the daily Sora rate fell back to 3.3298, with the one-month compounded Sora at 2.4708 per cent and three-month compounded Sora at 2.0851 per cent.

At Oct 4 rates, DBS and UOB’s three-month compounded Sora packages are priced at 3.0851 per cent per annum, with OCBC’s one-month compounded Sora package at 3.4508 per cent per annum and its three-month compounded Sora package at 3.0651 per cent per annum.

Mr Chng expects the United States Federal Reserve key rate to rise to 4.25 per cent in the short term and push up rates in the Singapore market.

However, he noted that there are growing concerns of a global recession, which might prompt the Fed to then lower rates again.

On Monday, a United Nations agency warned that aggressive monetary policies by central banks around the world could plunge the world into a recession that is worse than the global financial crisis of 2008.