DBS FHR Fixed Home Rate update – home owners to pay more

With effect from 4 March 2019, DBS FHR home loans pegged to DBS’ Fixed Deposit rates will be affected as the Fixed Deposit rates for the 7 to 48 months interest rates for SGD Fixed Deposit at DBS will be revised as follows:

DBS FHR Update – Fixed Deposit Rates Revised Upwards

DBS FHR Fixed Deposit Rate For amounts $1,000 to $999,999
Tenor	Existing (% p.a.)	New (% p.a.)
FHR Fixed Home Rate 7 months	0.6750	0.9500
FHR Fixed Home Rate 8 months	0.6750	0.9500
FHR Fixed Home Rate 9 months	0.9500	1.3500
FHR Fixed Home Rate 10 months	0.9500	1.3500
FHR Fixed Home Rate 11 months	0.9500	1.3500
FHR Fixed Home Rate 12 months	0.9500	1.4000
18 months	1.1000	1.4000
24 months	1.2000	1.4000
36 months	1.3000	1.4000
48 months	1.3500	1.4000

Table 1: DBS bank revises their Fixed Home Rate (FHR), Home Loans Pegged to this Fixed Deposit Rate will pay more from 4th March 2019 onwards.

A fixed deposit (FD) is a financial instrument provided by banks which provides investors a higher rate of interest than a regular savings account, until the given maturity date. It may or may not require the creation of a separate account. It is known as a term deposit or time deposit in Canada, Australia, New Zealand, and the US, and as a bond in the United Kingdom and India.

The difference with fixed deposit is that the money cannot be withdrawn from the FD as compared to a recurring deposit or a demand deposit before maturity. Some banks may offer additional services to FD holders such as loans against FD certificates at competitive interest rates.

It is important to note that banks may offer lesser interest rates under uncertain economic conditions. The interest rate varies between 0.95 and 1.4 per cent.

 

DBS launched the Fixed Home Rate (FHR) home loans that are pegged to the fixed deposit rates in 2015, since then a new category of Home Loans pegged to the Bank’s fixed deposit rates is born. Generally referred to as the DBS FHR home loan packages.

The home loan interest rate are based on: –

• FHR + Spread = Housing Interest Rate

If the FHR rises, then the interest rate rises. Some of them may be using FHR (8 months), so just look at the 8 month FHR plus the spread stated in your contract, this will be your new rate.

 

Some doubts over DBS FHR Fixed Deposit Pegged Home Loans

Initially it is thought that if the bank has $1,000,000 in fixed deposits in the 8-month Fixed Deposit (DBS FHR-8), therefore the bank can lend out $1,000,000 from this fund. However even if the bank has only $1,000,000 from the 8-month Fixed Deposit, it can lend out more than $1,000,000 because it can fund the loan from other pools of internal funds, although we do not really know how any specific bank funds their loan as this is an internal secret.

If a banks has $1,000,000 of depositors funds in one tranche of funds and then lends out $5,000,000 pegged to this Fixed Deposit rate, the bank may find it profitable to raise the rates for their fixed depositors as any cost increase is covered by 5 times more borrowers on this rate.

 

What is a Fixed Deposit Scheme

Fixed Deposit Scheme

The tenure of an FD can vary from 7 months days to 12 months and can be as high as 4 years. These investments are safer than investment schemes as they are covered by the Singapore Deposit Insurance Corporation or SDIC. However, SIDC guarantees amount up to $50,000 per depositor per bank.

The Monetary Authority of Singapore (MAS) in May last year announced that it has finalised proposed enhancements to the Deposit Insurance (DI) Scheme and Policy Owners’ Protection (PPF) Scheme. This follows from the public consultations in September 2014, April 2017 and August 2017. The proposed enhancements will strengthen protection for depositors and policy owners, and improve the operational efficiency of the Schemes.

MAS said that there is broad support from many stakeholders for the proposals, which include:

• increasing DI coverage from S$50,000 to S$75,000 per depositor in Singapore;
• clarifying a “personal” insurance policy under the PPF Scheme as one that is owned by a natural person; and
• setting under the PPF Scheme, a cap of:

a) S$50,000 for own property damage motor claims, under personal motor insurance policies; and

b) S$300,000 for property damage claims, under personal property (structure and contents) insurance policies.

The relevant legislative amendments was submitted to Parliament for approval. MAS said that it intends to effect the enhancements to the DI Scheme and PPF Scheme on 1 April 2019. This will provide Scheme members with sufficient lead time to put in place procedures to cater to the revised DI coverage limit and the introduction of caps for certain types of PPF policies.

DI Scheme

The DI Scheme in Singapore was established in 2006 with the primary objective of protecting small depositors. The Scheme protects deposits in savings, current and fixed deposit accounts that are held with full banks and finance companies. The Singapore Deposit Insurance Corporation (SDIC) is responsible for administering the DI Scheme and providing timely compensation for insured depositors in the event of a DI payout.

MAS, in consultation with SDIC, conducts periodic reviews of the DI Scheme to ensure adequacy of depositor protection while limiting the cost of the Scheme. The last review was in May 2011, and key enhancements included the increase in DI coverage limit from $20,000 to $50,000.

PPF Scheme

The PPF Scheme protects policy owners for all life insurance policies and certain general insurance policies in the event of failure of a life or general insurer. Such general insurance policies include accident and health policies, insurance that are required by law, and Singapore policies of specified personal lines such as personal motor and personal property (structure and contents) insurance. The Scheme was last reviewed in 2011, following enactment of the Deposit Insurance and Policy Owners’ Protection Schemes Act. The PPF Scheme is also administered by the SDIC.

Most people do not regard a fixed deposit account as a good form of investment due to the low interest rates. While higher than the interest rates offered by most savings accounts, fixed deposits still offer below-inflation interest rates.

But the simplicity of fixed deposits make them popular among the older generation, since you don’t need any skill, luck, or experience to make money from fixed deposits. Fixed deposits can also be useful to investors who are looking to build a foundation of stable assets that guarantee their principal and returns. They are also useful for sums of money you absolutely cannot afford to lose to the fluctuations of the market.

How to Secure a Home Loan Quickly

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Our mortgage brokers have close links with the best lenders in town and can help you compare Singapore home loans and also help you to settle for a package that best suits your home purchase needs. You can find out more about our money saving tips here.

Whether you are looking for a new home loan or to refinance, the Mortgage broker can help you get everything right from calculating mortgage repayment, comparing interest rates all through to securing the best home loans in Singapore. And the good thing is that all our services are free of charge. So it’s all worth it to secure a loan through us.

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