OCBC joins other local banks in upping rates for its fixed-rate mortgage
OCBC Bank has joined DBS and UOB in raising rates for its fixed-rate mortgages.
The rate for OCBC's two-year fixed package has been hiked by 0.33 percentage points to 2.98 per cent - the same as the revised rate from UOB.
DBS was the first of the three local banks to move on mortgages, raising the rates on its two- and three-year fixed packages to 2.75 per cent late on Tuesday (June 28). It also axed a five-year fixed rate package at 2.05 per cent exclusively for HDB homeowners.
Home loan rates have been steadily rising since the fourth quarter of last year when three-year fixed deals were at 1.15 per cent.
The moves by the three local banks follow aggressive rate rises by the US Federal Reserve as it tackles surging inflation.
This is raising expectations of another aggressive rate increase when the Fed meets on July 26 and 27.
The Fed has raised rates three times so far this year, by a total of 1.5 percentage points.
Mr Paul Wee, vice-president of fintech at PropertyGuru Group, said the US Fed has started to signal that a percentage point (100 basis points) increase in the benchmark rates is a possibility.
He said this has heightened the risk that Singapore mortgage rates will test or exceed 3.5 per cent.
The total debt servicing ratio (TDSR) framework introduced in 2013 had a stress-test interest rate of 3.5 per cent as the rate the banks use to extend loans.
If rates go up to 3.5 per cent, an individual can borrow only up to the limit where his monthly debt repayments do not exceed 55 per cent of total income.
Mr Wee said this may prompt the Monetary Authority of Singapore to raise the stress-test rate, which ultimately means homeowners will be able to borrow less if they still have to meet the TDSR limit.
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