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Fixed rate home loans at some banks down from recent highs

At OCBC, "promotional rates" for some fixed rate mortgage packages have been rolled out since mid-December.

SINGAPORE: After a series of sharp increases, fixed rate home loans offered at some banks appeared to have reversed their uptrend slightly of late.

OCBC told CNA that it rolled out “promotional rates” in mid-December, offering two-year and three-year fixed rate mortgages at 4.25 per cent and 3.9 per cent per annum respectively.

Two-year packages were previously set at 4.3 per cent, while the three-year equivalent was first introduced last month at 4 per cent.

The rate for the bank’s one-year fixed rate mortgage remains unchanged at 4.3 per cent.

OCBC is the only local bank to have refreshed its fixed rate home loan offerings since November when it, alongside DBS and UOB, raised mortgage rates to beyond 4 per cent following yet another steep interest rate hike by the United States Federal Reserve.

Among foreign lenders, PropertyGuru noted that it has observed slight downward adjustments to mortgage rates at Standard Chartered Bank and Citibank.

For example, two-year packages at Standard Chartered are currently at a fixed rate of 3.85 per cent, down from a peak of 4.5 per cent in late-November.

Likewise at Citibank, two-year fixed rate home loans for Citigold members taking a minimum loan size of S$800,000 have gone down to 3.85 per cent from 4 per cent in December, according to PropertyGuru.

When approached by CNA, both banks declined to comment on how their rates have changed. Standard Chartered would only say that it reviews its mortgage offerings regularly and adjusts them according to market conditions.

Last year, as central banks go on a rate-hike race to tighten monetary policy, banks have made rapid revisions to their borrowing rates. Mortgage rates, in particular, rose past the 4 per cent mark to levels unseen in recent years.

SingCapital’s chief executive officer Alfred Chia said the need to remain competitive is one reason why fixed rate mortgages at some banks may have come off their highs of late.

“At one stage, we saw fixed rates going to as high as 4.5 per cent but that was just for a very short period. Competition has now made it to about 4 per cent,” he said.

Market expectations for the US Fed to slow down on rate hikes this year and recent fluctuations in the Singapore Overnight Rate Average (SORA) are other factors, said Mr Paul Wee, vice-president of PropertyGuru Finance.

SORA, the volume-weighted average borrowing rate in Singapore’s unsecured overnight interbank cash market, went on a rollercoaster ride in December, starting the month at close to 4 per cent before losing ground to 1.65 per cent by Dec 30.

Mr Wee said this decline can likely be attributed to the lower inflation numbers out of the United States and concerns about the state of the American economy which are both feeding market expectations for a less hawkish Fed.

“In such a market, banks are likely to keep a close eye on their fixed rate packages and adjust them to keep pace with the SORA rate and market expectations,” he added.

That said, SORA has since rebounded – hitting as high as 3.8 per cent this week – reflecting the host of uncertainties that persist in the macro environment and in turn, the likelihood of continued volatility in mortgage rates moving forward, mortgage advisers said.

Several Fed policymakers have this week signalled support for more rate hikes and a top policy rate of at least 5 per cent, even as inflation shows signs of having peaked and economic activity is slowing, according to media reports.

“The general consensus is that the Fed rates will go up to 5 per cent but the challenge is whether the Fed will pivot then,” said Mr Chia.

“They are trying to do a balancing act between inflation and recession. But there is also a geopolitical situation in the form of the Ukraine war still going on, so I think that is the uncertainty that home owners will need to factor in.”

Even if the Fed pivots eventually to cutting rates, interest rates are unlikely to return to pre-pandemic levels, he added. “Unfortunately, the low-rate era is over.”

Source: CNA/sk(gr)


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