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Rising interest rates: Up to 3.85% for fixed mortgage rate in Singapore; more people placing fixed deposits

SINGAPORE — Property buyers are facing the highest housing loan interest rates in years, with some close to 4 per cent per annum.

Rising interest rates: Up to 3.85% for fixed mortgage rate in Singapore; more people placing fixed deposits
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  • UOB has raised the interest rate of its two- and three-year fixed rate home loan package to 3.75 and 3.85 per cent a year respectively
  • This comes slightly over a week after the bank, along with DBS, temporarily stopped offering fixed-rate home loans
  • DBS is now offering a home-loan rate of 3.5 per cent a year for its four fixed rate packages which range between two and five years
  • Meanwhile, with interest rates rising, several banks are also seeing more customers opening a fixed deposit account with them 

SINGAPORE — Property buyers are facing the highest housing loan interest rates in years, with some close to 4 per cent per annum.

However, as interest rates are going up, several banks have also reported a spike in the number of customers opening a fixed deposit account with them. 

In response to TODAY’s queries on Tuesday (Oct 4), the United Overseas Bank (UOB) said it is now imposing an interest rate of 3.75 per cent a year, and 3.85 per cent a year for its two- and three-year fixed rate home loan packages.

The rates were last changed on June 29 to 2.98 and 3.08 per cent respectively. 

Tuesday's figures are the highest mortgage rates in recent years.

One economist, Dr Chua Hak Bin, the regional co-head of macro research at Maybank, told TODAY recently that rising interest rates could drive Singapore mortgage rates as high as 5 per cent by mid-2023, their highest level in two decades.

Interest rates around the world are rising fast as many central banks look to quell persistently high levels of inflation by slowing their economies through making money more expensive.

Although Singapore's central bank doesn't set interest rates, borrowing rates here are heavily influenced by global trends, especially from the United States.

The revelation of UOB’s latest mortgage rate comes slightly over a week after the bank, along with DBS bank, stopped offering fixed-rate home loans as of Sept 23.

However, DBS, Singapore’s largest lender has now resumed providing fixed-rate home loans.

A DBS spokesperson said that the bank has reviewed and adjusted its fixed-rate home loans in accordance with the interest rate environment.

This means that it is now offering a home-loan rate of 3.5 per cent a year for its four fixed rate packages. These packages range between two and five years.

DBS was previously offering two- and three-year mortgage loans that carried a fixed rate of 2.75 per cent a year.

In addition, DBS said it hopes to "support those who are hardest hit by inflation" through its POSB HDB (Housing and Development Board) home loan package, which the bank launched last week.

Both new public housing buyers and existing flat owners who earn less than S$2,500 monthly may apply for the loan package.

It is now priced at 0.1 per cent over the prevailing Central Provident Fund Ordinary Account interest rate of 2.5 per cent.

The 2.6 per cent interest rate is similar to the current HDB concessionary loan rate.

OCBC bank likewise told TODAY on Tuesday that it now raised its two-year fixed-rate mortgages to 3.5 per cent a year, up from its previous 2.98 per cent. It is also now offering a one-year loan for 3.35 per cent a year.

Ms Phang Lah Hwa, head of consumer secured lending at OCBC, said the bank noticed an increasing number of customers seeking stability in their home loan rates and at the same time, looking for a shorter lock-in period for their home loan to enjoy greater flexibility.

"Given this trend in the market, we have decided to re-launch our one-year fixed-rate package together with our two-year fixed-rate package, albeit at a higher rate due to the current interest environment," said Ms Phang.

She said these pricing packages "strike the balance" between offering customers stability and yet giving them room to sell their property or review their home loans when the opportunity or need arises.

Currently, both Maybank and Standard Charted (StanChart) offer only a floating rate home loan package pegged to the benchmark Singapore Overnight Rate Average (Sora).

UOB’s head of group personal finance services, Ms Jacquelyn Tan, said the bank is continuously monitoring market conditions to ensure its home loan packages remain competitive.

And as purchasing a property is not only a significant milestone, but a long-term commitment, Ms Tan said homeowners are strongly encouraged to speak with their banks as early as possible.

She said this is to better understand how changes in interest rates will affect their home loans, as well as the steps they can take to mitigate any adverse risk and select a loan package that best suits their situation.

The flipside of higher borrowing costs is that banks will tend to offer better interest rates for customers with deposits.

Mr Na Kok Peng, head of deposits at OCBC, said on Tuesday that the bank has seen demand for time deposits go up.

Mr Na said demand was 75 per cent higher on average in September and August compared to the average placements in the preceding six months.

As of October, OCBC is offering a promotional interest rate of between 2.9 and 3.1 per cent per year for its 12-month time deposit.

Previously, the bank was offering a promotional time deposit rate of between 2.6 and 2.8 per cent a year for this package since Sept 15, which Mr Na said was also “well-received by customers” with placements growing close to 70 per cent compared to the same period in August.

UOB’s Ms Tan has seen a similar trend, with fixed deposit volume growth in September tripling that of August this year.

“Given the persistent high-interest rate climate, we have decided to further increase our promotional fixed deposit rates, to present our customers a safe, principal-protected hedge against inflation and volatility,” said Ms Tan.

To that end, Ms Tan said the bank’s 10-, 12- and 15-month fixed deposit tenors will now feature a 2.8, 2.9 and 3.0 per cent interest rate a year respectively. 

A spokesperson for StanChart said on Tuesday that it saw "an exponential increase in fixed deposit placements over the past months", while both current and saving account openings saw an increase of over 1.5 times since last year.  

Maybank similarly said on Tuesday that it has have been receiving a "positive response for our various fixed deposit promotion campaigns", though it did not provide figures to illustrate this. 

The bank's spokesperson said it has just rolled out its latest fixed deposit promotion rates across various time periods. The highest is 3.05 per cent a year for 15 months.  

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