Applying for a home loan in Singapore is a long-term financial commitment. Naturally, you’d want to ensure you not only start with a low interest rate, but you also want the reassurance that your interest rate won’t increase dramatically overnight.
The second half is called the spread. This represents the bank’s profits, and unlike the first half of the mortgage rate, this amount will not change during your loan tenure.Yes, but up to a point. Technically, the bank should not change their fixed deposit interest rates on a whim. Since interest paid on fixed deposit accounts represent a cost to the bank, it will cause the bank to think twice before raising the interest rate.
So if fixed deposit interest rates don’t go up, then your home loan interest rate will also not go anywhere. However, back in 2020, we learnt that banks are more than happy to be “generous” at your expense.Remember how the Police warn you “low crime doesn’t mean no crime”? In the same way, you can’t assume that “low risk means no risk”.
When FHR8 was introduced in 2018, it was 0.20 per cent. Just two years later, it reached a high of 0.95 per cent. Fortunately on May 4, 2020, FHR8 dropped for the first time to 0.60 per cent.Another thing to look out for is the reference fixed deposit rate. Over time, with different customers, banks can also change the fixed deposit interest rate their mortgage loans are pegged to.
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