The Fed raised rates in Washington, so why did a Singapore bank quote go up? This episode splits a home loan quote into the part the market sets, which looks ahead, and the part the bank sets, using SORA and swap rate figures from the end of September.
The Fed raised rates in Washington, so why did a Singapore bank quote go up?
Description: My neighbour in Tampines got a letter from her bank about her home loan, and she thinks the bank is using the Fed as an excuse. I answer with numbers, not feelings. A home loan quote has two parts, the part the market sets and the part the bank sets, and after the Fed hike only one of them moved, at least on floating loans. We split it all using SORA and swap rate figures from the end of September.
Key takeaways:
Floating loans price as SORA plus the bank’s mark-up, fixed loans price off swap rates
SORA averaged about 1.2% at end-September, up from 1% in the second quarter
Three-month swap rate sat at 1.59% versus 1.23% for three-month compounded SORA
HDB concessionary loan stays pegged at 2.6% through 31 December 2026
A 0.2 percentage point rise costs roughly $83 a month on a $500,000 loan
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