OCBC joins other local banks in upping rates for its fixed-rate mortgage

The rate for OCBC's two-year fixed package has been hiked by 0.33 percentage points to 2.98 per cent. ST PHOTO: KUA CHEE SIONG

SINGAPORE - OCBC Bank has joined DBS and UOB in raising rates for its fixed-rate mortgages.

The rate for OCBC's two-year fixed package has been hiked by 0.33 percentage points to 2.98 per cent - the same as the revised rate from UOB.

DBS was the first of the three local banks to move on mortgages, raising the rates on its two- and three-year fixed packages to 2.75 per cent on Tuesday night (June 28). It also axed a five-year fixed rate package at 2.05 per cent exclusively for HDB homeowners.

Home loan rates have been steadily rising since the fourth quarter of last year, when three-year fixed deals were at 1.15 per cent.

The moves by the three local banks follow aggressive rate rises by the United States Federal Reserve as it tackles surging inflation.

It has raised rates three times so far this year, by a total of 1.5 percentage points, with more expected when it next meets on July 26 and 27.

Mr Paul Wee, vice-president of fintech at PropertyGuru Group, said the US Fed has started to signal that a percentage point (100 basis points) increase in the benchmark rates is a possibility.

He said this has heightened the risk that Singapore mortgage rates will test or exceed 3.5 per cent.

The total debt servicing ratio (TDSR) framework introduced in 2013 had a stress-test interest rate of 3.5 per cent and is the rate the banks use to extend loans.

So if rates go up to 3.5 per cent, an individual can borrow only up to the limit where his monthly debt repayments does not exceed 55 per cent of total income.

Mr Wee said this may prompt the Monetary Authority of Singapore to raise the stress-test rate, which ultimately means homeowners can borrow less if they still have to meet the TDSR limit.

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