Singapore home loan rates hit new high of 3.08% with latest move by UOB

SINGAPORE – Home loan rates in Singapore have gone past 3 per cent to a new high with the latest move by UOB, Singapore’s third-largest lender.

The previous high was 2.88 per cent in mid-2019.

UOB on Wednesday night (June 29) raised the rate on its three-year fixed rate package to 3.08 per cent per annum, from 2.8 per cent previously. 

UOB said there is no change to its floating rate package, which is pegged to the three-month compounded Singapore Overnight Rate Average (Sora) plus a margin of 0.8 per cent.

The rate for its two-year fixed rate package was raised to 2.98 per cent per annum from 2.65 per cent.

Citi has also confirmed with The Straits Times that the rate for its new two-year fixed rate package for Citigold clients is at 2.95 per cent, 0.05 percentage point shy of the 3 per cent mark.

On Wednesday, Singapore’s largest lender DBS Bank raised the rates for its two- and three-year fixed rate packages to 2.75 per cent.

The bank also took away a five-year fixed rate package at 2.05 per cent exclusively for Housing Board home owners.

Home loan rates in Singapore have been on a steady uptrend since the fourth quarter of last year when three-year fixed rates were at 1.15 per cent.

They accelerated higher this year after the United States Federal Reserve began hiking rates aggressively to combat red-hot inflation. 

The Fed has raised rates three times so far this year, by a total of 150 basis points or 1.5 percentage points, pushing its benchmark rate to the range of 1.5 per cent to 1.75 per cent. 

Mr Clive Chng, associate director of mortgage broker Redbrick Mortgage Advisory, said that in this rising rate environment, the bank’s hedging costs have become more expensive so they have to raise rates to cover their costs.

Mr Ernest Tay, a real estate consultant at Huttons Asia, said that fixed rates take into account the future rate trajectory.

With rates expected to be rising, Mr Tay added that the banks need to price that in and hence raise their rates.

Mr Kevin Kwek, a senior analyst at Sanford C. Bernstein, said that the rate hike momentum could slow down going forward.

”From the banks’ side, the aggressive first hikes are in place, predictability of yield curve is also higher now as to how hikes will pan out,” he added.

For now, home owners are staying calm and will not be losing sleep over rising interest rates.

One of them is Sam Chang, 47, founder of board game designer Capital Gains Studio.

Mr Chang has a three-year fixed loan at 1.75 per cent with DBS, which is due sometime in the second quarter of next year.

Mr Chang said he will start shopping around for better rates come January next year.

“There is no point losing sleep over it. It’s about what kind of plans you take to mitigate the impact. It is about riding this period through and it will stabilise at some point,” he added.

Mr Chang also said he is prepared to pay down 15 per cent of his principal loan amount to cut down his interest payments and said he has the spare cash to do so.

“We can forgo an overseas vacation, some trade-off here and there,” he added.

Last week OCBC Bank told ST that it has re-introduced its two-year fixed rate package at 2.65 per cent a year.

The bank previously had a one-year fixed rate package at 2.25 per cent a year.

DBS has a hybrid fixed and floating rate package which offers a blended rate of as low as 1.7182 per cent, if the borrower chooses to take up 30 per cent of his loan under the two-year fixed-rate and 70 per cent under the floating rate package.