Proposed SIBOR revamp may lead to more fluctuation in home loan rates: Analysts

Singapore — The proposal to enhance the benchmark, which is used as reference for mortgages, was announced last week. Analysts said these changes, if implemented, will cause the benchmark to be more sensitive to market conditions.



How Much Money Do You Need To Buy Your First HDB Flat?


By Denise Bay |

Here’s a useful guide for all the Singapore citizens and PRs out there who yearn to have a home you can call your own but have no idea where to start. This guide is especially handy if you’re looking to purchase a HDB flat.

Now, I’m not going to lie, buying a flat isn’t fuss-free and the information that you have to absorb can be indecently overwhelming. And you have to have sufficient money, of course!

Well, for the purpose of making life easier for those of you who plan to get married and get your first flat soon, has done the hard work for you by researching the cost breakdown of your flat, the various home loans available, and sussing out key things you ought to know. Yes, you’re welcome.


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OCBC Has Got a New Home Loan Package – Here’s Why the DBS FHR Should Be Worried


By Peter Lin,

They say that imitation is the sincerest form of flattery. After all, your product must be pretty impressive if it’s going to get copied. We’ve heard of “brands” like “Johnnie Worker Black Labial”, “Pasunnic” and “PolyStation” being churned out on one side of the Pacific, and direct-to-video movies like “Avengers Grimm”, “Age of Tomorrow” and “Atlantic Rim” being filmed on the other side of the same Ocean.

Well, if that’s the case, here in Singapore, DBS should feel very flattered. It’s been slightly over a year since they introduced the DBS Fixed Deposit Home Rate (DBS FHR), their groundbreaking method of determining a home loan interest rate based on the fixed deposit interest rate. The response has been overwhelming. Concerns that the SIBOR would begin a much-dreaded rise dominated the news this year and customers looking for either new home loans or refinancing requests were quickly recognising the DBS FHR as a safer alternative.


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ANZ’s New Home Loan – What is the Combo Plus Package and How Does it Compare to the DBS FHR?

By Peter Lin,

Singaporeans love fads. If you’re around my age, you’ll remember how the bubble tea craze first started with hopeful entrepreneurs opening stalls all over the island, and the huge competition meant that prices began dropping like crazy. Eventually, they all closed down because the business was unsustainable. Then, a couple of years later, name brands like Koi and Gong Cha came into Singapore and were now selling bubble tea at premium prices, starting a new craze. It’s the same with the home loans market in Singapore.

DBS successfully launched the Fixed Deposit Home Rate or DBS FHR last year, which provided an alternative to the SIBOR for home loans. In order to stay competitive, ANZ now joins the fray with yet another alternative, the Combo Plus Package. This is an alternative home loan package that is not directly connected to the SIBOR. We’ll find out how it compares.

Okay… so how is the Combo Plus Rate calculated?
The Combo Plus Rate is the average of the 3-month ANZ cost of funds for SGD rate and the 12-month ANZ cost of funds for SGD rate. It is calculated on the first business day of the month.

Wait, how is the ANZ “cost of funds for SGD rate” determined? Is it transparent?
Very simply put, the cost of funds for SGD rate refers to the cost ANZ would incur to “borrow” money. This rate is based on the interest rate of their saving accounts that you deposit money into, as well as the interest rate in which banks in Singapore borrow money from each other. To get an idea how much it currently costs banks in Singapore to borrow money, we just need to look at the SIBOR or the Singapore InterBank Offered Rate.

However, unlike the SIBOR, which is publicly known, or the DBS FHR, the ANZ cost of funds for SGD rate is not publicly available. ANZ claims that they will publish the 5 year history for the cost of funds online but while writing this article, I was unable to find any trace of it. That’s not very transparent.

All we know is that the “cost of funds” also includes any additional costs incurred by the bank, such as administrative costs. Of course, this practice is normal and to be expected of any bank.

So, is it fair to say that the ANZ Combo Plus Package is like the DBS FHR-based home loan?
The DBS FHR is technically a board rate, since it is determined by the bank internally. However, unlike normal board rates, which are arbitrary, the FHR is reliant on the fixed deposit interest rates set by DBS. That means, should DBS want to increase their home loan rates, they would also need to increase their fixed deposit interest rates. This, of course, would not be prudent, since that represents a specific cost to the bank.

The ANZ Combo Plus Package works on a similar principle, but with a distinct difference. The Combo Plus Rate is very much a board rate, since it is determined by ANZ internally, with no real transparency as to how it is calculated. Now, you may say, that’s not a fair statement to make. By pegging it to the bank’s “cost of funds”, ANZ is assuring customers that they won’t artificially inflate the rates and that it is normally in their best interests not to raise the “cost of funds”, since that would mean that the bank’s own costs increase.

But that’s what makes all the difference!
With the DBS FHR-based packages, any increase in the home loan rate presumably also benefits customers, who will enjoy higher fixed deposit interest rates. For the ANZ Combo Plus Package, there is no immediate benefit to customers, since an increase in the Combo Plus Rate may not be due to an increase in the interest rates for any of ANZ’s savings accounts.

In an extreme scenario, this means that if you’re under the ANZ Combo Plus Package, you will be paying the price if ANZ does not keep its costs of borrowing money low. Crudely put, ANZ will be passing on any increase in cost they encounter directly to you, and there’s nothing you can do about it.

Wah, that bad? Why should anyone go for it then?
Because right now, it’s still competitive. The 3-month SIBOR (the benchmark for most home loans in Singapore) is currently at 1.13%. The current Combo Plus Rate is 1.29%. However, what makes ANZ’s Combo Plus Package competitive is the “fixed spread”, or the additional charges by the bank. The lower the spread the better!

ANZ’s Combo Plus Package offers an extremely low spread of 0.55% for the first year, 0.70% for the second year and 0.85% thereafter. Using the current Combo Plus Rate of 1.29%, these are the rates you can expect for your home loan:


However, at the end of the day, even a low spread won’t be able to save you if the Combo Plus Rate shoots for the moon, in response to an increasing SIBOR. However, based on current interest levels, it is still very much a competitive package and a good consideration.




What Singaporeans Can Do About Their Home Loan If the SIBOR Heads For the Moon


By Peter Lin,

It feels like the financial world Olympics, the way records are being broken these past few days. The Malaysian ringgit has slid to a new 17-year low against the US dollar. The expenditure at this year’s Great Singapore Sale hit a five-year high. And yesterday, the 3-month SIBOR has reached a 7 year high. But just before you start regretting that shopping spree both in Singapore and Johor, take a deep breath and find out exactly what you can do about your home loan now that the SIBOR looks to be going up yet again.

Just one minute… what is the SIBOR and why should I be worried that it’s going up?

The SIBOR is short for the Singapore Inter-Bank Offer Rate, and it’s predominantly used as a benchmark rate for property prices in Singapore. The SIBOR is determined by the Association of Banks in Singapore, and is based on the interest rates used by banks in Singapore when lending money to each other. Most home loans, in Singapore are based on the SIBOR.

That means, if the SIBOR is going up, your monthly home loan repayment is going to start costing you more.

What? Didn’t anyone see this coming? What has it been doing in the past?

The SIBOR has remained low in Singapore since 2008. Over the past 7 years, it’s ranged between 0.3% and 1%. This is mainly because of the connection between the US Federal Funds Rate and the SIBOR. The US Federal Funds Rate has remained at an all-time low over the past 7 years. However, expectations that a US Federal Reserve meeting later this week will result in an increase in the US Rate has caused the SIBOR to jump to its highest level over the past 7 years.

Of course, at 1.131%, it is still nowhere close to the record levels of 3.562% in 2006.

Aiyah… you’ve made me kan cheong already! How? What should I do with my home loan now?

Firstly, don’t panic! Your home purchase is probably the biggest transaction you’ve ever made in your life, so you’ll want to make sure you have enough information to make an educated decision on how to proceed from here.

At this point, I do need to note: the 3-month SIBOR and the 1mth SIBOR associated with your home loan is based on the SIBOR at the start of the month. Just because it’s reached a 7-year high this week doesn’t necessarily mean it’s going to start shooting up as it may not affect you immediately. Still, eventually it will once levels normalize at a new high and your loan interest rate refreshes at the new level.

Here are the 2 options you have should the SIBOR increase.

1. Refinancing your home loan

Refinancing means to transfer your home loan from the bank you’re with to another bank. Why would you do this? Mainly because of the interest savings that usually come with the switch.

When it comes to refinancing there are mainly three options on the market: board rates, fixed rates and floating rates. Board rates are a version of floating rates, but typically are not recommended as they could “sabo” you at a later date if you’re not careful.

Board rates
Board rates are essentially determined by some obscure and (usually) non-transparent method by the bank. It probably involves bloody animal sacrifices if you ask me. The problem that most don’t realise with board rates are that they bank retains the right to change this interest rate you pay, any point in time, at their discretion.

While most banks will tell you that they have not done so in the last 8 years, do you really want to run that risk? Also most board rates are low or market competitive from the 1st year to the 3rd, after which they move up to much higher interest rates from the 4th year and onwards.

This forces you to have to consider refinancing or repricing your loan, or risk being stuck with some very high monthly payments and being the bud of home loan jokes at your family BBQs.

Fixed rates
Fixed rates are interest rates that are determined by the bank for a stipulated period of time. For example, the interest rate for your home loan for the first three years are 2%. It will not change, no matter how high or low the SIBOR becomes. Most fixed rates will only last 2 to 3 years at best. However, during this period, you can rest easy knowing that your monthly repayment amounts remain the same.

Naturally, because the rate is secure for the fixed duration, these rates will be more expensive than floating rates as they bank charges a premium for this “security”.

Obviously, the best fixed rates are the ones that are lowest and last the longest. However, you will be “locked-in” to the bank for this period of time and you will be penalised should you try to repay your loan in part or in full during this fixed duration. You won’t be able to refinance with another bank during this time either without being penalised.

Also, you’ll want to make sure that when the lock-in period is over, that it converts to a reasonable floating rate. The last thing you want is a floating rate so high that you’re forced to consider refinancing again.

Floating rates
Floating rates are interest rates that are based on the SIBOR. If you are still reading this article, it probably means you’re currently paying off a floating rate home loan and you’re shitting bricks at the thought of your monthly repayments going up.

For floating rates, you’ll want to look out for packages that offer low spreads. A typical floating SIBOR rate looks like this:

Year One : 1mth / 3mth SIBOR + 1%

The 1% is known as the spread. Also check how long the spread is for – it usually rises dramatically in the 4th year. Since banks cannot control the SIBOR, it is also this spread where banks will compete with each other for your business, with higher or lower figures to entice you.

Other considerations
The important thing to remember is that no matter which option you choose, you will never be able to avoid the SIBOR completely. That’s because even a fixed rate will eventually convert to a floating rate (or a SIBOR-influenced board rate) after the lock-in period is over. If you’re planning to sell your house soon, you would probably want to look at packages with no lock-in period.

You’ll also want to make sure you only apply for packages that have legal subsidies. If not, refinancing may actually not be cost effective. For example, if refinancing will save you $3,000, but your legal fees cost $3,500, then it’s clearly better not to refinance.

That was a lot to take in… how about you just tell me what some of the packages are like now?

Case Study 1: You have an outstanding loan of $600,000 on a private property with a bank. Assuming you’re now paying 2.6% on your loan currently and have 27 years left on the loan, you could be saving up to $260 a month by switching to a DBS FHR loan. (no legal subsidy though). Alternatively, you could save up to $180 a month by switching to a fixed rate package with Bank of China.

Case Study 2: You have an outstanding loan of $1.2 million on a private property with a bank. Assuming you’re now paying 2.6% on your loan and 27 years left on the loan, you could save up to $500 a month by switching to a fixed rate package with SCB. You could also save up to $480 a month by switching to a floating rate package with Citibank.

Case Study 3: You have an outstanding loan of $150,000 on a HDB flat with a HDB loan. Assuming you’re now paying 2.6% on your loan, you probably should stay with HDB. Refinancing when your loan amount is so small would mean not getting any legal subsidies. The amount you save on interest would probably end up going into paying legal fees, so it’s not worth it.

Case Study 4: You have an outstanding loan of $450,000 on a HDB flat with HDB. Assuming you’re now paying 2.6% on your loan and have 27 years left on the loan, you could save up to $180 per month with Citibank.

*Estimates based on todays prevailing SIBOR rate, the actual figures will factor in things like your age and loan tenure of your current loan.  This is just to give you an idea of what the savings could be given your loan size.

Sounds good, but what other costs are involved?

A valuation report is needed for all bank loans and can cost up to $500, depending on the property type. There are also legal fees – these vary depending on whether you use the bank’s lawyers or hire some privately. Expect to pay up to $3,000.

Therefore, it is very important to make sure you get a loan package that comes with a legal subsidy.

2. Repricing your home loan

Repricing is similar to refinancing, except you don’t change the bank you’re with. The costs may be cheaper, because you save on legal and administrative costs. You can expect to pay around $500 if you reprice.

However, the offer your bank makes might not be in your best interests. For example, even though you pay less in legal costs, you might end up not saving as much compared to if you refinance. Remember to think long-term.

Okay, I think I’m going to go for refinancing! How long does it take?

Whoa… hold on! First you need to get your documents together. Check with the bank you’re keen on what documents you need. For example, you may need to find the original letter of offer from your bank, to calculate the maximum tenure they can offer.

Refinancing does take a while. Getting an approval for the refinancing at the new bank may take up to two weeks, but more importantly, you will need to serve a 3 month notice at your current bank. It might therefore be a good idea to start the refinancing process 3 months before you know your interest rates are going to go up.

Source :


Three-month Sibor reaches 7-year high

The key mortgage benchmark rose to 1.13100 per cent, the highest level since 2008.

The key mortgage benchmark rose to 1.13100 per cent, the highest level since 2008.

SINGAPORE: Singapore’s key mortgage benchmark jumped to a seven-year high on Monday (Sep 14), ahead of a Federal Reserve meeting later this week that could mark the start of US interest rate hikes.

The three-month Singapore Interbank Offered Rate (Sibor) rose to 1.13100 per cent, up from 1.07483 per cent on Thursday, according to latest data from the Association of Banks in Singapore. Monday’s level was the highest since 2008.

Many variable mortgage plans have interest rates linked to Sibor. For instance, Oversea-Chinese Banking Corporation currently offers home loans at three-month Sibor plus 0.9 percentage points for the first three years. Rising interest rates could put further pressure on residential property investors who are already grappling with falling rents and lower resale values.

A small majority of forecasters are predicting the US Fed will raise interest rates for the first time in nearly a decade when it meets on Wednesday and Thursday this week, according to a Reuters survey.

Source :

Property Update (17 April 2015)

Is the property market booming or bubbling? |

Peter Hobbs, research managing director at IPD,discusses property markets across the world.


3-month Sibor falls below 1% amid improved outlook for Sing dollar |

SINGAPORE: The benchmark three-month interest rate in Singapore fell for a third straight session on Thursday (Apr 16), dropping below the psychological 1 per cent level amid an improved outlook for the local dollar.

At the latest fixing on Thursday, the three-month Singapore interbank offered rate (Sibor), which is used to set floating-rate mortgages, slipped to 0.94654 per cent from 1.01241 per cent on Wednesday. This is the lowest level in about a month.

The Monetary Authority of Singapore (MAS) surprised financial markets on Tuesday by keeping monetary policy unchanged, sparking a rally in the Singapore dollar. The majority of forecasters had expected MAS to let the local dollar weaken slightly against a basket of currencies – either by widening the policy band in which the Singapore dollar trades or by recentering the midpoint of the band.

A softer Singapore dollar puts upward pressure on local interest rates as investors seek higher yields as compensation for holding the weakening currency, while a stronger currency helps keep interest rates down. Read more here >>


Does Singapore’s Orchard Road need a revamp? |

SINGAPORE : Orchard Road has long been regarded one of Asia’s best shopping streets, but the time is ripe for reinvention, the boss of a century-old retailer in Singapore told CNBC.

“20 years ago, we had the ‘Great Singapore Sale.’ Since then, I think we haven’t really re-invented anything,” said Christophe Cann, managing director of Robinsons Group, in an interview with CNBC’s ” Managing Asia .”

“Back then, it was convenient for regional customers to shop in Singapore because what they could find here, they couldn’t find elsewhere. But now, it is a different ball game,” he said.

Amid the population and consumer boom in other parts of Southeast Asia, global brands now have the option to set up shop elsewhere in the region, significantly reducing the need for people to travel to Singapore to shop. Read more here >>


Old and boring, but outperforming |

SINGAPORE : As is true with any market, the residential property market is not monolithic. In Singapore, it consists of many different segments, including the Housing and Development Board’s Build-to-Order and resale flats, as well as private condominiums and landed homes.

Within each market segment, specific areas and homes perform differently and have reacted to the Government’s property cooling measures and loan curbs in different ways.

SRX Property data shows that overall private non-landed housing prices have fallen 6.2 per cent since their market peak in January last year. The luxury housing project Ardmore Park, however, has seen prices plunging 23 per cent in roughly the same period. The reason for the difference in price depreciation is that the supply and demand characteristics in Ardmore Park’s pocket of the market are different from those of the overall condominium market. Read more here >>


Quezon City, Philippines, tops emerging market property searches |

PHILIPPINES : The most sought-after destination for real estate in emerging markets is Quezon City in the Philippines, says a specialist website.

The most populous city in the Philippines and Metro Manila’s largest city topped the list of most searched for locations in the first three months of 2015, with 49,244 inquiries on global property portal Lamudi.

Property demand in Quezon City is fuelled by employees of top multinational companies, including Emerson, Citibank and several call centre companies based there.

In second place was Karachi, in Pakistan with 44,981. Despite limited land availability, residential developments are still being launched with the southern part of the city favoured most.Read more here >>


Vietnam to open up property market to foreigners |

HO CHI MINH : Come July, the potential pool of buyers for CapitaLand’s Vista Verde condominium project in Ho Chi Minh City will grow exponentially.

A new law will allow foreigners with valid residential visas, as well as foreign companies, to buy in. Now, only those married to Vietnamese or foreigners deemed to be contributing to national development can own property.

Singapore developer CapitaLand says what makes Vietnam real estate compelling is a higher yield on rent compared to other countries in Asia.

CEO of CapitaLand Vietnam Chen Lian Pang says this ranges from 6 to 7 per cent depending on the location and type of property. “Vietnam has just gone through the bottom (economic) cycle. It is picking up, so there is a lot of upside actually.”

The sector is betting on three groups of buyers: a growing domestic middle class, returning overseas Vietnamese, and foreign executives moving in to set up manufacturing outposts. Read more here >>


California Home Sales Take Off in March |

CALIFORNIA, US : According to the California Association of Realtors, California’s housing market continued to pick up steam as existing home sales and prices propelled higher, with both posting back-to-back increases in March 2015.

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 391,680 units in March, according to information collected by C.A.R.

Sales in March were up 6.3 percent from a revised 368,400 in February and up 7.3 percent from a revised 365,120 in March 2014. The year-over-year sales increase was the first back-to-back sales gain since December 2012 and the largest observed since May 2012. The statewide sales figure represents what would be the total number of homes sold during 2015 if sales maintained the March pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales. Read more here >>