Fixed home loan rates in S’pore top 4% with latest hikes from DBS, OCBC
Home loan rates have shot past the 4 per cent mark after DBS and OCBC raised their fixed-rate packages on Tuesday.
DBS is now offering a rate of 4.25 per cent with tenors of 2 to 5 years, while OCBC has one and two-year fixed rates packages at 4.3 per cent.
A DBS spokesman told The Straits Times that many customers continue to choose fixed rate packages in anticipation of further rate hikes in the United States.
The bank is therefore offering longer tenure loans of 3 to 5 years, so customers can choose to lock in fixed rates for a longer period to give them peace of mind, he added.
OCBC’s head of home loans, Ms Maryanne Phua, said that popular demand has prompted the bank to reintroduce fixed rate packages, which were temporarily taken off the shelf some time in October. This is to give customers the flexibility to opt for the tenor that best suits their needs, she added.
The moves from DBS and OCBC come after HSBC raised the fixed rates for its two-year and three-year home loan packages to 4.25 per cent on Nov 8.
This brings fixed home loan rates above the 4 per cent medium-term interest rate floor that the Monetary Authority of Singapore (MAS) has set to determine the loan amount that an individual can apply for.
The medium-term interest rate floor framework ensures that borrowers continue to borrow prudently as interest rates rise.
Even though the latest home loan rates have exceeded the 4 per cent floor rate, borrowers need not be overly concerned that they are paying more than what they can afford.
This is because OCBC and HSBC are already using a higher rate of 4.5 per cent to calculate the maximum loan amount that a homeowner can borrow, while DBS is using 4.25 per cent.
As such, homeowners will only be allowed to borrow a smaller loan amount, thus ensuring that their monthly instalments can still meet the total debt servicing ratio (TDSR) threshold, which stipulates that a borrower’s total debt obligations are to comprise at most 55 per cent of his monthly income.
For instance, for a homeowner with a fixed monthly income of $10,000 and a loan tenure of 25 years, the maximum amount of loan he can borrow at the MAS medium-term loan rate of 4 per cent is around $1.05 million.
By using a higher rate of 4.25 per cent in DBS case, that same homeowner can now borrow lesser, around $1.02 million.
And, in OCBC’s case with a 4.5 per cent medium term rate to calculate the loan amount, the homeowner can only borrow about a million dollars.
Floating rate packages based on the Singapore Overnight Rate Average (Sora) remain unchanged, with DBS offering a package of three-month compounded Sora plus a 1 per cent spread.
OCBC’s package is based on three-month compounded Sora plus 0.98 per cent.
On Tuesday, the three-month compounded Sora has shot to 2.6633 per cent, which means DBS’s Sora package is at 3.6633 per cent a year and OCBC’s Sora package is at 3.6433 per cent a year.
DBS continues to have a home loan specially for homeowners of public housing (HDB) flats at 2.6 per cent a year - similar to the current HDB concessionary interest rate.
The spokesman added there is growing interest among customers for its two-in-one hybrid home loan packages as the blended rate of a hybrid loan package is typically lower than fixed rates.
DBS has added more options to its hybrid packages so customers can take up to 70 per cent of their home loan on a fixed-rate package, with the remainder on a floating rate package at three-month Sora plus a 0.75 per cent spread.
Previously, homeowners can have only up to 50 per cent of their loan amount under a fixed-rate package.