SIBOR is generally more stable while SWAP tend to fluctuate more. However 3-month SWAP has recently stayed consistently lower than 3-month SIBOR for an extended period of time. SOR is also very reactive to currency exchange rates.

Which bank offers the best home loan deals?

Interest rates and spreads are not all that matter. Don't ignore the closing costs involved. Different banks can have different customized home loans for you. Don't be surprised if you will save more on a home loan that charges more interest because of the lesser closing costs involved. This is especially so if you know that you will refinance your home loan as soon as the lock in period has expired.

HDB loan or bank housing loan?

Our opinion is to always take a HDB concessionary loan if you are eligible for one. One of HDB's objectives is to to provide affordable housing for the people. While a bank is profit driven.

Index Rate

An index rate refers the the rate of an index that a housing loan is pegged against.

All mortgages in Singapore consist of interest rates that are pegged to index rates.

This is so that banks will never be making a loss from the loans they underwrite.

Because should the cost of credit rise above the interest on home loans, lenders can easily adjust the interest rates upwards by adjusting the index rate.

Either that, or market forces will drag index rates upwards along with it.

Even fixed rate loans will eventually be priced at index plus spread when the initial period of fixed rate starts to float.

The index used for HDB home loans are CPF rates.

The common indexes used by banks include:

  • SOR
  • FD rate
  • Prime rate
  • Variable rate
  • Board rate
  • etc

Take note that various indexes are internally set by lenders and are just internal board rates by different names.

While indexes like SIBOR and SOR are more transparent in that they are determined by market forces that no single lender will have total control over, internal board rates are solely set by lenders.

It is up to them to determine and decide what their boards rates will be.

It’s almost as if banks will have the power to decide how much profits they want to make from borrowers.

This means that should you have choice of which index to choose for your housing loan, do consider which index is the most transparent instead of just focusing on the price it is at at the moment of signing up.

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