OCBC offers lower mortgage rate — but for just 15 days

SINGAPORE — Aiming to capture a bigger slice of the home loan pie from its rivals amid the weak property market outlook and rising interest rates, Oversea-Chinese Banking Corp (OCBC) today (Feb 12) announced a mortgage package significantly lower than prevailing rates, in partnership with personal finance portal MoneySmart.sg. 

The catch? The deal will be offered for only 15 days.

To kick in from Monday, the package is a fixed deposit-linked interest rate plan at 36-month Fixed Deposit Mortgage Rate, or OCBC 36FDMR (0.65 per cent), plus 0.98 per cent for the first three years. 

The 1.63 per cent rate applies for loan amounts of S$500,000 and above. It is open to homeowners and buyers seeking to refinance or apply loans for their completed or resale private residential properties, said MoneySmart.sg. 

Weighed down by economic uncertainty, a housing glut, rising mortgage rates and a slew of cooling measures and loan curbs, the residential property market will remain under pressure. Property experts, including Century 21 chief Ku Swee Yong, expect prices to fall by as much as 12 per cent this year.

In OCBC’s latest quarterly results, the bank reported that net profit for the July to September period fell 27 per cent year-on-year to S$902 million in the absence of exceptional gains previously enjoyed.

However, it beat expectations with a 7 per cent increase in core third-quarter net profit as loans growth boosted interest income by 6 per cent. The increase was largely due to lending to the building and construction sector as well as housing loans, the bank said. OCBC will report its fourth-quarter and full-year earnings next week.

On its latest salvo, OCBC Bank’s head of home loans Lee Mei Ling said: “OCBC Bank partnering with an independent high-value personal finance comparison portal is an opportune alliance and we see significant value in this synergy ... Through this partnership, we are happy to offer MoneySmart.sg’s extensive consumer base the opportunity to take up our most popular pricing option.”

In the wake of OCBC’s announcement, rival DBS said a home loan is a long-term commitment, and urged borrowers to approach their existing banks to explore options most suited to their needs. “It is also important to note that refinancing has its pros and cons, and there are other options to consider in managing one’s home loan,” said Ms Tok Geok Peng, DBS Bank’s executive director of secured lending. 

“For example, a fixed home loan may be more suitable for a borrower who is concerned about rising interest rates. Borrowers should also consider if there are additional fees that they might have to bear if they redeem their loans early.” 

DBS currently offers its Fixed Deposit Home Rate, or FHR18, with interest rates of as low as 1.95 per cent (0.60 per cent plus 1.35 per cent), for a two-year lock-in period, based on its prevailing 18-month Singapore-dollar fixed deposit rate for amounts from S$1,000 to S$9,999.

A United Overseas Bank spokesperson said: “Homeowners, while conscious of interest rates, should be aware that the rates for fixed deposit-linked home loan packages can fluctuate due to various economic factors. Home ownership is a long-term commitment and we encourage home owners to approach their banks for advice.”

Last December, the US Federal Reserve raised its key interest rate target for the first time in nearly a decade. The Singapore Interbank Offered Rate (SIBOR) and the Swap Offered Rate (SOR) — the two key benchmarks against which the vast majority of housing loans here are pegged against — are expected to broadly move in line with US interest rates and raise mortgage costs.

The three-month SIBOR currently hovers at 1.25 per cent and the three-month SOR is at 1.31 per cent, up to three times higher compared to the beginning of last year, when the three-month SIBOR and three-month SOR were at 0.4 per cent and 0.8 per cent, respectively.