DBS raises home loan rates, scraps 5-year fixed-rate HDB package
DBS raises home loan rates, scraps 5-year fixed-rate HDB package. DBS Bank, Singapore’s largest lender, raised interest rates on all of its home loan products as of Tuesday night (June 28). In addition, the bank discontinued its five-year fixed-rate package for Housing Board flat buyers, which previously offered loans at 2.05 percent.
The move comes after its peers UOB and OCBC raised interest rates on their home loan packages last week, following the US Federal Reserve’s interest rate hike earlier this month. UOB increased its two-year fixed-rate package to 2.65% per annum, while OCBC increased its two-year fixed-rate package to 2.65% per annum.
However, DBS’ fixed-rate packages are now the most expensive of the three local banks, at 2.75 percent per year. 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 per month at the new fixed rate of 2.75 percent. At the previous fixed rate of 2.45 percent, the monthly installment would have been $1,338. This equates to a monthly increase of $46.
Fixed mortgage rates appear poised to reach the 2.88 percent high last seen in mid-2019, as Singapore interest rates rise.
Mr Clive Chng, associate director of mortgage broker Redbrick Mortgage Advisory, believes fixed rates for home loans in Singapore may even reach 3% because inflation has never reached such highs in the United States or Singapore over the last decade.
According to Mr Ernest Tay, a real estate consultant at Huttons Asia, unless the energy crisis caused by the Ukraine war is resolved, inflation will remain a problem that will force the Fed’s hand. However, he does not expect the Fed to raise its benchmark rate above 4% or 5% because doing so would risk a bad recession.
DBS also made changes to home loans tied to the Singapore Overnight Rate Average (Sora), a benchmark interest rate that has risen dramatically.
Its Sora floating rate package has increased by 0.2 percentage points to a three-month compounded Sora plus a 1% annual margin with a two-year lock-in period.
Last week, OCBC reduced the rates on its Sora floating package to one-month compounded Sora + 0.98 percent per annum, while UOB’s Sora floating package remains at three-month compounded Sora plus 0.8 percent per annum.
Mr Nelson Neo, head of home financing solutions at DBS’ consumer banking group, pointed out that the bank also provides a Two-In-One Home Loan package, which 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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