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Bank Loan Trend 2023
Types of Home Loan Packages offered by Banks
Fixed Rates Packages:
Currently banks are offering fixed rates for 1 to 5 years, thereafter floating rate takes over. Banks are obligated to keep the fixed rates unchanged. Fixed rates are usually preferred by borrowers who prefer stability and certainty in monthly repayment.
Floating Rates Packages (pegged to):
- SORA: The first housing loan package referencing SORA was introduced in 2020. SORA is the volume-weighted average rate of borrowing transactions in the unsecured overnight interbank SGD cash market. Currently it is offered by most banks including OCBC, UOB, DBS, Stanchart, HSBC, Citibank, Maybank, CIMB and State Bank of India. Interest rate is pegged to 1-month Compounded SORA or 3-month Compounded SORA which are published daily by MAS. Learn more about SORA and Compounded SORA Trend.
- Mortgage Board Rates: These rates are determined by individual banks. Banks justify the increase to their board rates when market rates like SIBOR and SORA increases. Frequency of adjustment is at banks' discretion. Currently offered by Hong Leong Finance.
- SGD Fixed Deposit Board Rates: These packages are often misunderstood as fixed rates packages. Frequency of adjustment is at individual banks' discretion, similar to Mortgage Board Rates. Fixed deposit board rates can be referenced from banks' websites. Currently only offered by DBS.
Bank Loan Features
Lock-in/ Commitment Period:
Nowadays, most loan packages come with a lock-in period of 2 years. This means that during the lock-in period, banks will charge a penalty fee if you make partial or full redemption of outstanding loan. Loan packages for properties under construction usually do not have any lock-in period.
Legal Subsidy / Cash Rebates:
Banks may include legal subsidies / cash rebate in their loan packages, depending on the loan amount. Not applicable for purchase of residential properties. All subsidies/ cash rebates are typically subject to 3-year clawback period.
Onetime Free Conversion:
Onetime free conversion allows you to convert your loan package with existing bank at no cost during a specified period stated in the loan contract. This is most commonly found in loan packages meant for properties under construction.
Penalty Waiver for Partial Prepayment:
There are some banks offering loan packages that allow penalty to be waived for partial prepayment up to a specified limit during lock-in period.
Penalty Waiver for Property Sale:
This is an added feature offered by some packages, to give flexibility to borrowers who may be selling their properties during lock-in period.
Interest offset feature allows borrowers to link their housing loan servicing account to their deposit account, such that the funds in the deposit account are earning deposit rate ranging from 50% to 70% of housing loan rate. Interests earned are used to offset housing instalment to reduce principal faster. This feature is only offered by HSBC, Stanchart and Citibank.