Monday, January 25, 2016

Refinancing Your Housing Loan To Fixed Rates When Interest Rates Are Rising

Interest rates are rising and is still rising. Back in 2013, I started to write about the possibility of a rise in interest rates which will hurt people who are over-leveraged on debt. That was a time when interest rates were at a very low level due to QE from the US. When they started to reduce and then stop the QE, interest rates started to rise.

Home Loans Rates will be affected immediately

The rise in interest rate will affect most of us who have home loans with the banks currently. The effect is felt almost immediately with many banks starting to revise their home loan packages one by one. No longer will we see home loan interest rates of less than 2% soon. Previously, many people switched from HDB loan to bank loan to take advantage of the low interest rates which was only 1%+. With their CPF OA giving interest at 2.5% and them paying less than 2% for their mortgages, many would have benefited from switching.

However, did you know the average historical interest rates is about 3.5%? The rates will be going in that direction and probably will reach 3.5% very soon. This is also a rate set by MAS when calculating the total debt servicing ratio (TDSR). Our central bank wants to ensure people are still able to service their loans even when interest rates rise to 3.5% which is the average historical rate we should be looking at too.

The rise in SIBOR and bank's board rate

The SIBOR and board rate are 2 of the most common variable loan packages in Singapore. If you're not sure which loan package you are on, chances are you are also on the SIBOR or board rate packages. This is because if you do not refinance your housing loans, your loan package will automatically be changed back to the variable rate package even if you are on fixed rate previously.

Recently, UOB and Maybank separately announced to their customers that they will be increasing their board rate. Maybank announced that their board rate will increase by 0.25% effective 18 February 2016 and UOB announced their board rate will increase by 0.5% from 15 February 2016.

The 3M SIBOR has also increased from 0.25% in 2011 to 1.25% just last week. This is already a 1% increase in interest rates.

Revision of Fixed rate packages in Singapore

Fixed rate packages are not spared either. Banks in Singapore have been removing and revising their fixed rate packages in Singapore since the past few months. The revision has gone up by as much as 0.5%. Most fixed rate packages in Singapore are already at more than 2% versus the 1.68% which I saw just a few months ago.

Refinancing to fixed rate packages is the best thing to do in a rising interest rate environment. While most fixed rate packages are already above 2%, there is still have a good fixed rate package which is below 2% but this will end by 31st January 2016.

If you would like to refinance to a fixed rate package that is still below 2%, you can email me at I will advise you personally on the package and also process the application for you. Here are the services I provide as a mortgage consultant in Singapore:

A point to note is if your home loan package is still under a lock in period, you can refinance now to get the good rates as long as the lock in will finish within 6 months. You will not incur any penalty charges. If you wait till the end of your lock in period, by then most of the home loan rates would have been revised upwards.

Mortgage loans are one of the largest expenses which most Singaporeans would have. If we can just save a few hundred a month by refinancing, it will definitely make us more financially well off. For a $400,000 mortgage loan with interest at 2.6%, we would be paying $10,400 in interest alone in one year only. Time to take action before its too late. The good home loan packages will be gone very soon.

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Related Posts:
1. Fixed Deposit Home Rate - The Alternative Interest Rate To SIBOR
2. Prepare To Pay Higher For Your Home Loans If You Do Nothing
3. Should Couples Buy A 5 Room HDB Flat For Their First BTO Application?


  1. Just few months ago, I wanted to refinance my fixed rate housing loan with OCBC after my lock-in period. OCBC quoted me 2.08% in interest rates while DBS /UOB only charging 1.98%. In the end, I figure it may not be worth incurring the legal cost to change bank. Is it the right move? Guess I will not be taking any loan with OCBC again in the future.

    1. Hi,

      There are legal fee subsidy for some packages. I can do a personal consultation with you and recommend the right package for you and let you see whether is there any cost savings. You can email me at Thanks!