New benchmark for DBS mortgages

In order to provide borrowers with a more simple and easy-to-understand mortgage package, DBS Bank has established a new yardstick for calculating the interest rates of their housing loans according to media reports.

Dubbed as the fixed deposit home rate (FHR), it is derived from the simple average of DBS Bank’s 12-month and 24-month fixed deposit (FD) rates. At present, the FHR is at 0.40 percent, given the 12-month FD rate of 0.25 percent, while its 24-month rate stands at 0.55 percent.

“The response has been encouraging”, said DBS Bank’s Managing Director Lui Su Kian.

Since the FHR package was introduced around three months ago, over 50 percent of its clients opted for it. Others still favour SIBOR-based mortgages, while the rest prefer fixed-rate loans, noted Lui, who is also the Head of Deposits & Secured Lending at DBS Bank.

Nevertheless, the company still offers housing loans based on the Singapore Interbank Offered Rate (SIBOR), which remains as the most in-demand mortgage at other financial institutions.

“Most consumers lean towards SIBOR rates – they want something simple and easy to understand,” Lui said. These wholesale rates are also accessible, but their formulas are quite technical.

Furthermore, SIBOR rates are more volatile compared to fixed deposit rates. In fact, the most popular mortgage tenure — the three-month SIBOR – ranged from 0.37083 percent to 0.40626 percent in the past two years.

“Hence, FHR will appeal to home buyers who wish to take advantage of the low interest environment and yet have some protection from market movement,” added Lui.

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