Banks in Singapore raise interest rates on mortgage loans

OCBC raised the rates on its one-year fixed rate loan to 1.65%, from 1.55%.

SINGAPORE: Home owners will have to fork out more for their fixed-rate mortgage payments after some banks here raised their fixed interest rates in anticipation of further rate hikes in the United States.

Citibank was the latest to raise interest rates on its fixed-rate loans last Friday. Citi’s two-year fixed rate loan is now at 2.45% – up from 2.35% – while the three-year fixed rate loan has jumped to 2.65% from 2.53% previously.

A check by The Straits Times (ST) found that some of the other banks have also raised fixed rates as recently as last week.

OCBC raised the rates on its one-year fixed rate loan to 1.65%, from 1.55%.

DBS’ two-year fixed rate package is now at 2.25%, from 1.65% last month, while its three-year fixed-flexi package is at 2.5%, from 1.85% previously.

As for UOB, the bank told ST that the rate for its two-year fixed rate package is 2.35% as at May 5. If the loan amount is more than S$300,000 (RM945,960), UOB said the interest rate will be lower at 2.25% for the first two years.

Meanwhile, floating interest rates pegged to the Singapore Overnight Rate Average (Sora) have not moved as much yet with the exception of Citi, which last Friday raised the margin for its two-year Sora-pegged loans to 0.78%, from 0.7%.

DBS and UOB have maintained their lending margins at 0.8%, while OCBC has maintained it at 1.2% for year one and 1.3% for year two.

Sora is the interest rate benchmark for pricing mortgage loans in Singapore. Banks typically charge either a one-month compounded Sora or three-month compounded Sora plus a lending margin for their Sora-pegged floating rate loans.

The one-month compounded Sora is based on Sora rates over the past month, while the three-month compounded Sora is based on Sora rates over the past three months. But why are fixed rates going up relatively faster than Sora-pegged floating rates?

Eugene Leow, senior rates strategist at DBS Bank, said fixed rate loans are forward looking over a period of time, such as two to three years. The rates have to take into account a more hawkish US central bank in the coming quarters.Roy Phua, head of mortgage business at Citibank Singapore, said that in a rising rate environment, fixed rate packages are higher as funding costs for the medium term (two to three years) have priced in higher future interest rates. — The Straits Times/ANN

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