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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.


Singapore Housing Loan Interest Rates – Know What You Are Paying

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Fixed rate and floating rate

Fixed rate mortgages have interest rates that are fixed and guaranteed for the initial few years of the mortgage.

This will be clearly specified in the offer from the bank.

After which, the interest rate will float and be benchmarked to a reference rate.

Depending on the mortgage lender, the reference rate can be different between different banks.

The reference rate may be determined by criteria set by the bank itself. It can also be benchmarked against a publicly available index like the CPF interest rate, or the commonly used SIBOR and SWAP.

Even for fixed rate Singapore housing loans, the interest charged will eventually be subject to market forces.

This means that during the initial period where you are charged fixed interest rates, it can be considered a promotional rate for you to choose and make housing loan comparison of one bank over another.

Floating interest rate loans have interest rates that float from the star of the loan.

There are no fixed rate periods. Interest rates are also benchmarked like the floating period of a fixed rate Singapore home loan.

Floating rates are also commonly know as variable rates.

The interest rates for the first initial few years are often lower than those of the subsequent years.

Again this can be considered a promotional rate period.

Reference rates used for benchmarking can differ from bank to bank.

The SIBOR and SWAP are commonly used by the mortgage lenders for benchmark.

And these rates are determined by fluctuating market forces.

However a lender may also create it’s own reference rate by considering factors such as prevailing market rates, operational costs, type of housing loan, loan tenure, quantum of property loan requested, etc.

When you have taken up a Singapore housing loan with a reference rate that is self-determined by the bank, they can usually change the reference rate to reflect latest adjustments at any time.

They have to give you advanced notice before any the change in reference rate can take effect.

However, if your property loan uses SIBOR or SWAP as reference rate, you may not receive any interest rate change notice as these rate are publicly available and you were suppose to understand and agree to the rates before accepting the offer.

Effective interest rate housing loan Singapore

The effective interest rate on your mortgage package is an expression of the costs of interest reflected on an annual basis for the life of the mortgage.

It essentially means that you will be paying a lower total interest when the effective interest rate is lower.

A good use of effective interest rate is to apply it to make home loan comparison between different loans from different lenders.

A home loan calculator that is relevant to Singapore should easily display the effective interest rate that you will be paying.

Do note that the effective interest rate for your mortgage is computed based on the prevailing current interest rates and the assumption that interest rates will remain the same as current rates throughout the life of the mortgage.

However, reality tells us that we can expect interest rates to fluctuate over time.

So effective interest rates are based on assumptions and only a good indication for comparison at one point in time.

Singapore home loan structure

There are 2 common method used by lenders to compute your interest rates.

  • Monthly reducing rate. This structure reduces the principal amount every month when you make your installment payment. The interest payable for the following month is based on the reduces principal from the previous month.
  • Annal reducing rate. Instead of reducing the principal every month, this structure reduces the principal on an annual basis.

To have a clear picture of how much a portion of your monthly payments are for reducing principal amount and how much a portion goes into paying interest, it is best that the offering bank illustrate this to you with a housing loan calculator.

With the break down, you can also make proper comparison between banks.

When your repayment schedule is generated by a housing loan calculator, you can observe more clearly of how the entire mortgage is worked put.

Do note that the results generated by the calculator are based on prevailing current interest rates. Interest rates can be revised in the future during the life of the housing loan.

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What We Do For You

We Gather And Provide You Information On The Best Housing Loans In Singapore So That You Can Make A Better Decision Based On What Is Available In The Market

Which bank do you recommend for home loans in Singapore?

We don't recommend banks. We recommend you the best home loan that suits your profile and financial position.

How Does SOR Rates Hit Negative Value?

SOR rates are calculated with a complex financial formula, solved with simple algebra. The results of solving the equation therefore depends on the inputs used. Varying inputs that result from economic impacts and indicators can lead to negative value when the formula is solved. Key input indicators include USD/SGD spot rates and USD/SGD forward rates.

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.

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.

Want to see housing loan interest rate trends for the last 36 months?

Enter your email below so we can send it to you.

Get Rates Trend

It makes absolutely no sense to pay more
than you have to on a home loan.

Find the best mortgage rates here

It makes absolutely no sense to pay more than you have to on a home loan.

Find the best mortgage rates here
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