OCBC home loans are offered by Oversea-Chinese Banking Corporation (OCBC), which is the longest established Singapore bank and ranked among the world's safest and strongest banks by leading industry publications. There are different types of OCBC home loans: new purchase home loans, refinancing home loans, renovation loans, overseas property loans and construction loans.
In the area of home loans, OCBC stands out in being 1 of only 2 banks in Singapore that offers a floating rate home loan that is pegged to its fixed deposit (FD) rate. Here, we at GET.com will show you the pros and cons of OCBC's 36-month FD-linked mortgage so that you will have a clearer idea of how it can benefit you.
Best OCBC Home Loan Rates
OCBC's 36M FD-Linked Mortgage
As its name suggests, OCBC's 36M FD-linked rate refers to its prevailing 36-month SGD FD rate (currently standing at 0.65%) plus a fixed percentage. DBS, the first bank to launch such a mortgage package in Singapore, offers the DBS FHR18 which refers to its prevailing 18-month SGD FD rate (currently standing at 0.60%) plus a fixed percentage.
What's To Like About OCBC's 36M FD-Linked Mortgage
So, what's so special about OCBC's 36M FD-linked mortgage, and how does it stack up against the more traditional mortgage counterparts i.e. fixed rates, variable/board rates and SIBOR or SOR-pegged rates?
The FD-linked mortgage offers more stability as compared to SIBOR or SOR-pegged mortgages where the interest rates are more sensitive to interest rate and exchange rate movements.
After all, just take a look at OCBC's 36M FD rate which has remained the same at 0.65% for over 4 years (since November 2011).
In contrast, the SIBOR rates and SOR rates have seen various peaks and troughs to the extent of the 3M SIBOR/SOR diving into near zero/negative territory in 2011 and shooting past the 1% level in early 2015. Both benchmark rates are prone to frequent fluctuations, influenced by the expected and actual Fed rates movement.
The FD-linked mortgage is more specific on the interest rates applicable annually, as opposed to a fixed rate package which is usually fixed for only the first 2 to 3 years of the loan tenure, following which, the package could be pegged to other variable or floating rates.
In comparison with banks' board rates, the FD-linked rate is also more transparent as to how the applicable mortgage rate is determined, since the FD rate is readily available to the public.
The lower interest rate volatility and greater transparency on rate derivation give you a much clearer idea of how much you will end up paying each month for your home loan.
One of the best features of the OCBC 36M FD-linked mortgage is that it allows you to change and reprice your loan package if its fixed deposit rate increases, for free!
36M FD-Linked Mortgage: What To Look Out For
Minimum Lock-In Period
As with the majority of home loan packages, the OCBC 36M FD-linked mortgage may come with a minimum lock-in period, which is typically 2 or 3 years.
So even as you pride yourself in securing a relatively more stable mortgage package, do note that you still run a risk of paying more than those with loans pegged to the SIBOR or SOR if these benchmark rates are to plunge, and you are tied to your existing mortgage rate during the lock-in period.
FD-Linked Rate Is Subject To Change
Also, do remember that the FD-linked rate is considered a type of board rate. This means that the bank is at liberty to increase its FD rates or even the fixed percentage that's added on to the FD rate at anytime.
After all, the only thing ever constant in life is change, so it's wise to stay prepared and be ready to pick up better home loan options when the opportunity arises.
Home Loan Tips
Are you dreaming of becoming a home owner? Owning a home can be a great financial investment, but a home loan can be a financial burden if you're not careful.
This is why before getting a home loan you should know what you're getting into and compare different types of home loan packages to find one that suits your needs.
To help you with this, we've compiled some useful information that will make you more savvy when faced with a home loan's fine print.
If you're a first-time buyer, read our step-by-step home buying guide for first-time buyers in Singapore.
Use GET.com's Home Loans Genius Tool to check out the latest FD-linked mortgage packages in town, or to compare home loans and find the best fixed or floating rate loan for your needs, whether you want to refinance your current home loan or get an affordable loan for your new purchase.
To find out more, take a look at our home loans guide in Singapore.