Which home loan packages should you consider for the best value?

By EdgeProp Singapore

/ EdgeProp |

January 23, 2018 9:00 AM SGT

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What goes down must come back up. Unfortunately, this seems to be the current state of our mortgage rates. Since the beginning of the year, banks have raised interest rates for both fixed and floating home loan packages by 10 to 30 basis points.

DBS and UOB are now charging an interest rate of 1.95 percent and 2.05 percent a year respectively for each of the three years of their 3-year fixed rate packages. Both banks were charging 1.85 percent for the same package respectively in end-November and 1.68 per cent respectively in September.

Meanwhile, OCBC raised its 2-year fixed rate package from 1.75 percent to 1.85 percent per annum for each of the two years. The rate from the third-year is 1.90 percent.

Obviously, this is bad news for buyers, who now have to fork out more for a home, especially if they’re looking to purchase private properties.

But it’s not all doom and gloom. Rising interest rates may yet curb the property market recovery, as there are other positive drivers such as a strong economy, a healthy job market and good wage growth.

Also, for aspiring homebuyers, knowing the difference between fixed and floating rate packages can make a difference spanning thousands of dollars every year.

In general, someone with a lower appetite for risk should go with a fixed rate package as loan repayments will be consistent and predictable regardless of market conditions. However, fixed rate interest also tends to be higher.

On the other hand, while floating rate mortgages tend to come with a lower interest rate, they are more volatile and are usually based on the movement of (Singapore Interbank Offered Rate) SIBOR on a monthly or three-month period. This means your interest rates and mortgage repayments will change every one to three months.

Don’t know where to start to find the best rates? Check out our 2018 top picks of the latest home loan packages in the market for private properties.

Best fixed-rates home loans as of January 2018:

Loan Packages	Year 1	Year 2	Year 3
HSBC	1.65%	1.65%	2.05%(SIBOR + 0.75%)
Bank of China	1.65%	1.65%	2.16%(SIBOR + 0.7%)
Citi	1.65%	1.65%	2.35%(SIBOR + 1.05%)
Maybank	1.70%	1.75%	1.85%(BOARD - 2.15%)
OCBC	1.75%	1.75%	1.80%(BOARD + 0.8%)
UOB2 years fixed package	1.75%	1.75%	1.85%(FDR + 1.60%)
DBS	1.75%	1.75%	1.95%(BOARD + 1.75%)

*All loans come with a 2-year fixed period

Best floating-rates home loans as of January 2018:

Loan Packages	Year 1	Year 2	Year 3
CIMB Private Property Loan	1.60%(SIBOR + 0.3%)	1.65%(SIBOR + 0.35%)	1.70%(SIBOR + 0.4%)
Citi Floating Package (SIBOR 1M)	1.60%(SIBOR + 0.3%)	1.60%(SIBOR + 0.3%)	2.10%(SIBOR + 0.8%)
*OCBC Bank OHR Floating	1.60%(BOARD + 0.6%)	1.65%(BOARD + 0.65%)	1.70%(BOARD + 0.7%)
**Maybank Variable Rate Package	1.62%(BOARD - 2.38%)	1.65%(BOARD - 2.35%)	1.68%(BOARD - 2.32%)
UOB 15M FD Pegged	1.65%(BOARD + 1.4%)	1.65%(BOARD + 1.4%)	1.65%(BOARD + 1.4%)
DBS Floating Package	1.65%(BOARD + 1.45%)	1.65%(BOARD + 1.45%)	1.65%(BOARD + 1.45%)
OCBC Bank OHR Combo	1.65%(BOARD + 0.65%)	1.65%(BOARD + 0.65%)	1.70%(BOARD + 0.7%)

*All loans come with a 2-year lock-in period unless stated otherwise

*No lock-in period

**3-year lock-in period

Which home loan package is for you?

Assuming that you are getting an 80% loan for a $1 million property over a 30-year loan tenure, here’s how much you could be paying. For simplicity’s sake, we used fixed and floating rate packages with the lowest total payment amounts as examples. Rates are for illustration purposes only and are not to be used for official means.

EXAMPLE 1: Lowest overall payment for fixed rate home loan packages include: Maybank Fixed Rate Package (2 years), OCBC Bank OHR Fixed Rate, and DBS 2 Years Fixed Package.

Loan Package	Year 1	Year 2	Year 3
OCBC OHR Fixed Rate	1.75%	1.75%	1.80%(BOARD + 0.8%)

Years	Monthly payment ($)
1st year	2,858
2nd year	2,858
3rd year	2,878
4th year	2,878
Thereafter	2,917

Total principal payment: $ 800,000

Total interest: $ 247,791

Total payment: $ 1,047,791

In general, fixed rate packages tend to be more favourable when interest rates are on the rise. They typically come with higher interest rates in exchange for greater stability, and for buyers who like to have a sense of financial certainty on how much they’ll be paying, then a fixed rate package is the way to go.

EXAMPLE 2: Lowest overall repayment for floating/variable rates include: UOB 15-month Fixed Deposit Pegged Rate (FDPR), DBS Floating Package and OCBC OHR Floating.

Loan package	Year 1	Year 2	Year 3
UOB 15M FD Pegged	1.65%(BOARD + 1.4%)	1.65%(BOARD + 1.4%)	1.65%(BOARD + 1.4%)

Years	Monthly payment ($)
1st year	2,819
2nd year	2,819
3rd year	2,819
4th year	2,819
Thereafter	2,819

Total principal payment: $ 800,000

Total interest: $ 214,807

Total payment: $ 1,014,807

Floating rate packages charge lower interest at the outset. However, it is important to note that if the bank needs to increase the fixed deposit rates to attract more funds, the home buyer may see an increase in borrowing rates.

The same goes to floating rate packages that are tied to SIBOR and SOR movements. They tend to be favourable when interest rates are set to fall and are more suited for borrowers who are financially secure enough to weather market volatility in hopes of lower monthly repayments.

The takeaway

When it comes to home loans, sometimes the cheapest package isn’t always the best. For instance, some banks may offer the cheapest rate in the first year, but the rates may be significantly higher in the third or fourth year.

Which is why you should always do your homework and compare all available options in the market before deciding which home loan package works best for your home purchase. You may even want to engage a mortgage specialist to help you decide which home loan package is most suitable for you. After all, buying a home is likely to be the biggest financial commitment of your lifetime!

*Note: Rates are accurate at the time of writing and are subject to change without prior notice

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