Current Mortgage Rates Conventional Loan – There are two types of mortgage loans offered to potential home buyers: fixed rate and floating rate loans. Fixed rate packages are convenient; As the name suggests, these packages provide an interest rate that is determined by a reference rate, such as a bank’s fixed deposit rate.
Fast Track packages are a bit more complicated. Unlike in the past, these packages offer variable interest rates that are adjusted to specific financial indicators in the money market. Because of the difference, these rates are called floating bank rates!
Current Mortgage Rates Conventional Loan
So, let’s dive deeper into what banks rate: who decides it, what drives it, and how it works for a real estate investor like you.
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As mentioned earlier, floating bank rates, as their name suggests, are adjusted periodically based on assumptions about all changes in the lending index or market. Money for them – in this case, in real estate.
Essentially, these rates ‘float’ on the equity market, or above, on all the forces of the real estate market in general (as banks adjust rates based on where that market will go). .
We are going to discuss in detail the various interest rates that Singapore banks use (or have used) over the years.
Note that going forward, SORA will be the standard for floating rate mortgages and other types of interest rate financing that will not be available!
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However, we understand that some are still on the “old” floating interest packages and are now deciding whether to move to a fixed interest rate package or the current floating interest rate package updated by SORA. To be continued.
We hope this article can help you compare your current plan, and thus help you decide on your next interest rate package!
Board rates are used to develop mortgage loan rates. The salary of the bank’s board is, as the name suggests, internally fixed.
A mortgage loan with a floating rate based on the bank’s prime rates can be attractive to home buyers because it doesn’t change or fluctuate with other banks’ interest rates.
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While other rates like SOR, SIBOR and SORA – which are determined by the movements of the money market – are always variable (of course these rates vary from day to day), on the other hand, the bank’s board rates change. Maximum in every quarter.
Although banks are allowed to change their interest rates at will, these rates do not change to maintain the confidence of potential customers: if the bank’s interest rate is up to 1.5 percent, you (mostly in cases) can be sure. It will stay that way for a few months.
One of the biggest problems that home buyers face when getting a prime rate mortgage is the lack of transparency.
Board rates are determined not by your average mortgage broker and their direct supervisors, but by the bank’s top management.
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In fact, prime rates are also better indicators of fixed-rate mortgages than floating-rate mortgages, which are linked to other financial benchmarks. Buyers and sellers cannot predict which bank benchmark rates will move (except, perhaps, international interest rates).
Also, banks have to give only 30 days notice to their customers for interest rate changes. Now isn’t that good news for your financial plans?
Therefore, in recent times, SOR and SIBOR (and more recently, SORA, based on some external financial developments) have become increasingly important benchmarks for mortgage lending in Singapore.
Let’s look at another type of floating rate bank rate used in mortgage loans: the Singapore Exchange Rate (SOR). The SOR is based on external indicators rather than using internal feedback among the bank’s top management.
Current Mortgage Interest Rates
According to the official website of the Association of Banks in Singapore (ABS), the SOR is calculated using the weighted average rate of the USD/SGD exchange rate (US dollar London Interbank Offered Rate, USD or LIBOR).
In layman’s terms, SOR is the cost of first borrowing USD to get SGD and then converting it to SGD through a foreign currency.
As Singapore has become a global financial hub, with many international financial institutions setting up shop in the country, the SOR was introduced to settle USD/SGD exchange transactions (which are more common in Singapore). .
SOR-based mortgages remain attractive in the short term, especially when SOR rates are lower than SIBOR rates. For comparison, at the time of writing (January 2021), the 3-month SOR rate stands at 0.19%, while the 3-month SIBOR rate, in contrast, stands at 0.41%.
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This is especially good at a time when the global economy is in recession, confidence is low and finances are not as attractive as they used to be – is this common sense?
This means that there is less participation in the money market – especially with exchange transactions – and therefore, it is more likely that SOR will be lower than SIBOR, and its borrowings will be at local interest rates. Will come what banks give to each other (so it’s probably not a recession).
If you are looking for a long-term mortgage loan, SOR may not be attractive. Referring to the graph mentioned above, one can see that the 3-month SOR will be different from the 3-month and 1-month SIBOR. why like this?
Because its calculations are derived from global money market indices, the SOR is more sensitive to global money market trends than to local money market patterns.
Current Mortgage Rates
In July 2017, the ABS announced that it would move away from using the SOR as a benchmark in early 2019, particularly as USD LIBOR becomes more important for funding new loans after the end of 2019. will not be used.
But if you do decide to take out a SOR loan, you will still be operating as a business entity through a commercial loan. So, while you may not be able to get an SOR loan for a home, you can for a new office building.
In addition, banks are using the Singapore Interbank Borrowing Rate (SIBOR) for some mortgage loans. SIBOR is a daily benchmark determined by the interest rates that banks offer each other when lending – hence the term ‘interbank’.
SIBOR is an interest rate that is higher than the conventional bank rate. You can check their rates under the official ABS website, but you also need to know how SIBOR is calculated and where the number comes from.
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Also, SIBOR, compared to SOR, has a fixed floating interest rate. As mentioned earlier, SIBOR, unlike SOR, bases its rates on the lending bank interest rate in Singapore, rather than the international USD LIBOR. Therefore, SIBOR is less sensitive to global money market conditions and, therefore, does not fluctuate as much as SOR.
SIBOR rates come in 1-month, 3-month, 6-month and 12-month terms, while on the other hand, SOR rates come in overnight, 1-month, and 3-month terms. and 6-months. In fact, SIBOR is generally more favorable for long-term mortgages.
SIBOR is an interest bank rate not higher than the board rates. After all, they are connected to Singapore’s financial market. So, if you want to take out a mortgage loan based on SIBOR, you should be prepared to take on more mortgage risk than your mortgage loan based on the board rate.
In many cases, consumers take mortgage loans at rates linked to fixed deposits, not only because of the stability offered by these rates but also because, unlike board rates, banks have less incentive to raise these rates. Is.
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This is because if banks increase their fixed deposit rates, they will certainly earn more money from mortgage borrowers. However, on the other hand, they will have more money to repay the interest earned from fixed depositors.
The issue of low transparency remains: as with board rates, at the end of the day, they are decided internally.
And finally we have the Singapore Overnight Rate Average, or SORA, an interest rate index administered by the Monetary Authority of Singapore (MAS) that is ‘supported by a deep and liquid overnight financial market,’ which on the SORA According to the ABS report. But what does that mean?
Simply put, SORA is not determined by a group of banks as to which direction interest rates will go (unlike SIBOR, which takes its calculations from interest rates issued between banks).
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SORA has the same transparency advantages as its cousins, SOR and SIBOR. While you can check your SOR and SIBOR rates on the ABS official website, you can check past and current SORA transactions on the MAS website.
However, even in this
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