SINGAPORE – Home loan rates in Singapore have hit 3.5 per cent, a high that has not been reached in recent years, as DBS Bank became the latest institution to raise its fixed-rate mortgage packages.
The most recent high was 3.08 per cent for a three-year fixed-rate package from UOB, which the bank temporarily removed from the markets in September.
According to DBS’ website on Tuesday morning, home owners can choose between two-, three-, four- and five-year fixed-rate packages, all at rates of 3.5 per cent per annum.
This is 0.75 percentage point higher than the earlier fixed-rate packages from DBS that were offered at 2.75 per cent per annum.
The 3.5 per cent rate is also 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 medium-term interest rate floor is used to compute the total debt servicing ratio, which remains at 55 per cent and refers to the portion of a borrower’s gross monthly income that goes towards repaying all his monthly debt obligations.
To illustrate, a home owner who has a $500,000 loan with a 30-year tenure will pay a monthly instalment of $2,041 at the 2.75 per cent rate.
With the new rate of 3.5 per cent, his monthly instalments will shoot up by $204 to $2,245.
DBS had removed its fixed-rate packages in September and said the rates were under review.
UOB announced in late September that it was temporarily removing its two-year fixed-rate package at 2.98 per cent per annum and three-year fixed package at 3.08 per cent per annum.
OCBC Bank has told The Straits Times that its two-year fixed-rate package offering 2.98 per cent per annum remains in the market.
Mr David Baey, founder and chief executive of mortgage brokering platform Mortgage Master, said a 3.5 per cent fixed rate is still reasonable as the Singapore Overnight Rate Average (Sora) is expected to hit 3.2 per cent by the first quarter of 2023.
Sora is used to price floating-rate home loan packages, which are usually computed using one-month compounded Sora or three-month compounded Sora plus a spread.
“When you add the spread, it will still be higher than 3.5 per cent,” said Mr Baey, adding that “it is the last chance to get a fixed rate”.
DBS’ floating-rate package remains the same at three-month compounded Sora plus a spread of 1 percentage point.
source https://netdace.com/latest-news/dbs-raises-its-fixed-home-loan-rates-to-3-5/