What You Should Know About Housing Loans – Interest Rates
Interest Rates under a Fixed Rate Loan Package:
How long will the interest rates remain fixed? Is the subsequent interest rate benchmarked against any reference rate? If so, what is the reference rate?
For fixed-rate loan packages, interest rates are fixed and cannot be changed in the first few years. Subsequently, the interest rates will be variable and typically benchmarked against a reference rate (See Section 4a). You may refer to the Residential Property Loan Fact Sheet provided by the bank during the housing loan application process for details.
The fixed rate period can be considered as a promotional period as the rates in this period are generally lower than the subsequent variable rate.
Take note that where the subsequent interest rates are variable, your bank may revise i) the type of reference rate (e.g. 3-month Singapore Interbank Offered Rate (SIBOR), 6-month Singapore Swap Offer Rate (SOR), internal board rate) or ii) spread or iii) both the spread and type of reference rate under certain circumstances. Such circumstances should be specifically set out in your Residential Property Loan Fact Sheet and your housing loan agreement. Please see more on Interest Rates Under a Variable Rate Loan Package below.
Interest Rates Under a Variable Rate Loan Package:
Is the interest rate benchmarked against any reference rate? If so, what is the reference rate?
Interest rates under variable rate loan packages are typically benchmarked against a reference rate.
The interest rates of a variable loan package typically comprise 2 components:
(i) Reference rate; and
The reference rate may be:
- a publicly available financial indicator, like the Singapore Interbank Offered Rate (SIBOR), Singapore Swap Offer Rate (SOR) or the interest rate paid by the CPF Board on CPF Ordinary Accounts or the bank’s internal deposit rates; or
- determined by factors set by the bank (e.g. internal board rate)
When will the bank start charging interest on a housing loan?
A bank will start charging interest only from the date the housing loan is first disbursed. They will not charge interest from any other dates (e.g. housing loan agreement date). Your bank will let you know when the housing loan is disbursed as well as the monthly repayment instalment to make or the interest you have to pay.