DBS and OCBC Increase Fixed Home Loan Rates to 4.3%: What Buyers Need to Know
SINGAPORE — Home loan rates rose above the 4% mark after DBS Bank and OCBC Bank raised their fixed-rate packages on Tuesday.
DBS now offers a rate of 4.25% with terms of two to five years, while OCBC offers one- and two-year fixed rate packages at 4.3%.
A DBS spokesperson told the Straits Times that many customers continue to choose fixed rate plans in anticipation of further rate hikes in the United States.
The bank is therefore offering longer-term loans of three to five years, so customers can choose to lock in fixed rates for a longer period to give themselves peace of mind, he added.
OCBC’s Head of Home Loans, Ms Maryanne Phua, said popular demand prompted the bank to reintroduce fixed-rate offers, which were temporarily pulled from the market in late October.
It’s about giving customers the flexibility to opt for the content that best suits their needs, she added.
The decisions by DBS and OCBC come after HSBC raised fixed rates on its two- and three-year home loans to 4.25% on November 8.
This brings fixed mortgage rates above the 4% medium-term interest rate floor that the Monetary Authority of Singapore (MAS) has set to determine the amount of loan an individual can apply for.
The medium-term floor interest rate framework ensures that people continue to borrow or take out loans cautiously as interest rates rise.
Even though the latest home loan rates have exceeded the floor rate by 4%, borrowers need not worry too much about paying more than they can afford.
Indeed, OCBC and HSBC already use a higher rate of 4.5% to calculate the maximum loan amount a homeowner can borrow, while DBS uses 4.25%.
As a result, homeowners will only be allowed to borrow a lower loan amount, ensuring that their monthly payments can still meet the total debt service ratio threshold, which states that a borrower’s total debts must represent no more than 55% of their monthly income.
For example, for a homeowner with a fixed monthly income of $10,000 and a loan term of 25 years, the maximum amount he can borrow at the MAS medium-term loan rate of 4% is approximately 1 .05 million.