DBS raises home loan rates, scraps 5-year fixed-rate HDB package

by Albert02

DBS raises home loan rates, scraps 5-year fixed-rate HDB package

DBS raises home loan rates, scraps 5-year fixed-rate HDB package. Singapore’s largest lender, DBS Bank, raised interest rates on all of its home loan products on Tuesday night (June 28). Furthermore, the bank dropped its five-year fixed-rate package for Housing Board flat buyers, which had previously offered loans at 2.05 percent.

Following the US Federal Reserve’s interest rate hike earlier this month, its peers UOB and OCBC raised interest rates on their home loan packages last week. UOB raised its two-year fixed-rate package to 2.65% per annum, while OCBC raised its two-year fixed-rate package to 2.65% per annum.

However, at 2.75 percent per annum, DBS’ fixed-rate packages are now the most expensive of the three local banks. A DBS customer who takes out a $300,000 two-year fixed-rate loan with a loan term of 25 years would now pay $1,384 in monthly instalments at the new fixed rate of 2.75 percent. The monthly instalment would have been $1,338 at the previous fixed rate of 2.45 percent. This equates to a $46 monthly increase.

Fixed mortgage rates appear set to reach the 2.88 percent high last seen in mid-2019 at the rate at which Singapore interest rates are rising.

Mr Clive Chng, associate director of mortgage broker Redbrick Mortgage Advisory, believes fixed rates for home loans in Singapore could reach 3% because inflation has never been this high in the United States or Singapore in the last decade.

According to Mr Ernest Tay, a real estate consultant at Huttons Asia, inflation will remain a problem that will force the Fed’s hand unless the energy crisis caused by the Ukraine war is resolved. He does not expect the Fed to raise its benchmark rate above 4% or 5%, however, because doing so would risk a severe recession.

DBS also made changes to home loans linked to the Singapore Overnight Rate Average (Sora), a benchmark interest rate that has skyrocketed in recent years.

Its Sora floating rate package has risen by 0.2 percentage points to a three-month compounded Sora plus a 1% annual margin, with a two-year lock-in.

OCBC reduced the rates for its Sora package to one-month compounded Sora + 0.98 percent per annum last week, while UOB’s Sora floating package remains at three-month compounded Sora plus 0.8% per annum.

Mr Nelson Neo, head of home financing solutions at DBS’ consumer banking group, noted that the bank also offers a Two-In-One Home Loan package that allows borrowers to structure up to half of their loan amount as a fixed rate package and the remainder as a floating rate package with special rates.

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