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HSBC Home Loan Review Singapore 2019 – SIBOR vs Fixed Deposit vs Fixed Rate Comparison

HSBC home loan review singapore

Clara Lim

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HSBC may not have a huge presence in Singapore like DBS or OCBC, but one thing they are quite aggressively pushing out right now are their housing loans. Right now, HSBC is offering a whole bunch of different home loan packages. They pretty much run the gamut from fixed rates to SIBOR-pegged rates to fixed deposit-pegged rates.

Which packages are you eligible for, and which are actually worthwhile to consider? We’ll untangle all of HSBC’s mortgage options in this article.

 

HSBC home loan for BTO / property under construction

If you’re planning to get a home loan for a BTO or private property under construction (technical term: BUC, or building under construction), HSBC has just the one home loan package:

HSBC home loan SIBOR-pegged
Lock-in None
Year 1 2.07% (1M SIBOR + 0.25%)
Year 2 2.07% (1M SIBOR + 0.25%)
Year 3 2.07% (1M SIBOR + 0.25%)
Thereafter 2.52% (1M SIBOR + 0.7%)
Benchmark 1M SIBOR (1.82%)
Min. loan amount $200,000

Like every other bank loan for BUCs, the HSBC package has no lock-in period and it’s a floating loan. So how do you compare bank loans then?

One way is to look at the benchmark it’s pegged to. The HSBC home loan package is pegged to the one-month (1M) SIBOR, which is a transparent and independently-derived inter-bank rate.

That’s in contrast to some other banks which peg theirs to an internal board rate which no one has any visibility on.

1M SIBOR may be somewhat volatile, but at least you can monitor it independently and prepare yourself for changes in your monthly instalments. That, to me, is preferable to getting a heart attack when your bank decides to up their home loan board rates for no good reason.

The other thing to look at is how much the bank marks up this benchmark. Yup, that’s the “+ 0.25%” you see up there, also known as the “spread” in bank-speak.

A spread of 0.25% is considered low – this number is usually more like 0.7% under regular circumstances – and suggests that the bank is trying to make this home loan more attractive to you. After 3 years, though, it jumps up to 0.7%, which will inflate your home loan significantly.

Don’t get too caught up in the final interest rate of 2.07%, because this changes from month to month, and many banks are offering SIBOR-pegged rates for their BUC loans anyway. What you want is a home loan with a low spread for as long as possible.

 

HSBC home loans for completed property (min. $800K)

If you’re financing a completed home, such as an HDB resale flat or private property that’s ready to move into, then you’ll have a lot more options from HSBC. And I mean a lot.

For easier comprehension, I’ve split up the packages according to how much you’re planning to borrow – whether it’s above or below $800,000.

Here are the home loan packages available for those who want to borrow at least $800,000. Swipe left to see the full table.

HSBC home loan SIBOR-pegged SIBOR-pegged TDMR-pegged Fixed rate Fixed rate
Lock-in 2 years 2 years 2 years 2 years 3 years
Year 1 2.07% (1M SIBOR + 0.25%) 2.27% (1M SIBOR + 0.45%) 2.78% (TDMR 24 + 2.13%) 2.7% 2.9%
Year 2 2.07% (1M SIBOR + 0.25%) 2.27% (1M SIBOR + 0.45%) 2.78% (TDMR 24 + 2.13%) 2.7% 2.9%
Year 3 2.07% (1M SIBOR + 0.25%) 2.27% (1M SIBOR + 0.45%) 2.78% (TDMR 24 + 2.13%) 1M SIBOR + 0.75% 2.9%
Thereafter 2.47% (1M SIBOR + 0.65%) 2.27% (1M SIBOR + 0.45%) 2.78% (TDMR 24 + 2.13%) 1M SIBOR + 1% 1M SIBOR + 1%
Benchmark 1M SIBOR (1.82%) 1M SIBOR (1.82%) TDMR 24 (0.65%) 1M SIBOR (1.82%) 1M SIBOR (1.82%)
Min. loan amount $800,000 $200,000 $200,000 $800,000 $800,000

So, HSBC offers 3 types of home loans: SIBOR-pegged, TDMR-pegged and fixed rates.

HSBC’s SIBOR-pegged home loans are currently the cheapest of the lot, but there are 2 of them to choose from, and you need to know the pros and cons.

We’ll call the first one the “jumping” SIBOR loan. At the start of the loan, your interest rate is 1M SIBOR + 0.25% (a pretty low markup). Based on the current SIBOR, this means you pay just 2.07% interest per year, which is one of the cheapest on the market. But after 3 years, it jumps up to 1M SIBOR + 0.65%, which means you’re probably gonna need to refinance.

The other SIBOR-pegged loan doesn’t jump. The interest rate starts out higher, at 1M SIBOR + 0.45%, but it remains at that throughout the entirety of the loan. This is a viable compromise for those who want a floating rate home loan (more volatile but cheaper than fixed), yet don’t want the hassle of having to refinance every couple of years.

The second type of HSBC home loan is pegged to TDMR, which is HSBC’s fixed deposit interest rate (24-month average). The idea is that it’s “safe” to opt for this because why would HSBC anyhow increase their FD rates, right? Wrong! The bank can jack it up anytime they like, so it’s really no different from opting for a board rate home loan.

The third one is HSBC’s fixed rate home loans. This is pretty much self-explanatory and is the loan type of choice for those who are averse to risk (and changing monthly repayments).

The standard lock-in is 2 years, after which the interest rate goes back to a floating one (bye bye, security blanket). You can pay more for an extra year of security, but the interest rate is really quite high at this point: 2.9% from the very start, whereas HSBC’s cheapest floating loan package is almost a third cheaper at 2.07%.

 

HSBC home loans for completed property (under $800K)

HSBC offers their best interest rates for loan amounts of $800,000 and up, which is totally understandable from a business standpoint, but you may not hit this if you’re buying an HDB flat or refinancing an existing home loan.

For loan amounts between $200,000 and $800,000, here are the options:

HSBC home loan SIBOR-pegged SIBOR-pegged TDMR-pegged Fixed rate Fixed rate
Lock-in 2 years 2 years 2 years 2 years 3 years
Year 1 2.12% (1M SIBOR + 0.3%) 2.27% (1M SIBOR + 0.45%) 2.78% (TDMR 24 + 2.13%) 2.75% 2.95%
Year 2 2.12% (1M SIBOR + 0.3%) 2.27% (1M SIBOR + 0.45%) 2.78% (TDMR 24 + 2.13%) 2.75% 2.95%
Year 3 2.12% (1M SIBOR + 0.3%) 2.27% (1M SIBOR + 0.45%) 2.78% (TDMR 24 + 2.13%) 1M SIBOR + 0.75% 2.95%
Thereafter 2.52% (1M SIBOR + 0.7%) 2.27% (1M SIBOR + 0.45%) 2.78% (TDMR 24 + 2.13%) 1M SIBOR + 1% 1M SIBOR + 1%
Benchmark 2.52% (1M SIBOR + 0.7%) 1M SIBOR (1.82%) TDMR 24 (0.65%) 1M SIBOR (1.82%) 1M SIBOR (1.82%)
Min. loan amount $200,000 $200,000 $200,000 $200,000 $200,000

Yep, they all look awfully similar to the home loan packages in the previous section, and that’s because some are simply the same thing but with slightly different rates due to the smaller loan amount.

Again, the same 3 sub-categories of home loans apply, so I’m going to do a quick recap of the pros and cons.

The SIBOR-pegged loans come in 2 varieties – the kind whose interest rate jumps after Year 3, and the kind that doesn’t. For the latter, you pay more from the start, but it also means you’re not forced to refinance after a few years.

The TDMR-pegged loan is technically a fixed deposit-linked loan, but in reality, it’s practically a board rate loan. HSBC can raise it whenever they please. Not worth it for a big loan of $800,000, and not worth it for anything smaller either.

Finally, for fixed rate home loans, you can also borrow any amount from $200,000 to $800,000, but the fixed rate will have an extra 0.05%. So instead of 2.9% interest for a 3 year loan, you pay 2.95% instead.

 

So… which HSBC home loan is the best?

If you’re financing an as-yet-incomplete property, there isn’t a decision to be made. There’s just the one SIBOR-linked home loan package for BUCs. Note, though, that while the interest rates for the first 3 years are good, it’ll jump up rather steeply from Year 4 onwards. So either go in with your eyes open, or shop around for a better mortgage.

For those financing a home that’s already built, with a loan amount of at least $800,000, you’d choose from either the SIBOR-pegged or the fixed rates. Both SIBOR-pegged home loans are good, with the “jumping” home loan package offering some of the cheapest rates for the first couple of years.

HSBC’s 2- or 3-year fixed rate packages also stand out, not because the rates are particularly low (they’re not), but because after the fixed rate expires, the interest rate reverts to a floating rate pegged to SIBOR rather than an internal board rate or fixed deposit rate, which is the case with most other banks.

If you’re interested in this sort of fixed rate package structure, do also check out Citibank’s home loans. Their 2- and 3-year fixed rate loans have slightly better rates during the lock-in periods, but after that, the SIBOR-pegged rates are poorer than HSBC’s.

Oh and if you’re refinancing an existing home loan, the same analysis applies. Just note that you might get slightly poorer rates for smaller loans (but that’s normal). HSBC gives you cash rebates of $1,000 to $2,500 (depending on loan amount) to offset the legal fees of refinancing.

Want to know more about HSBC home loans and how they stack up against the rest? Speak to one of our mortgage specialists to find out which bank is offering the best home loan in Singapore for your needs.

 

Looking for home loans from another bank? Here are the other home loan packages we’ve reviewed.

Best Home Loans Singapore – Most Affordable Housing Loans Reviewed

DBS Home Loan Review Singapore

OCBC Home Loan Review Singapore

UOB Home Loan Review Singapore

BOC Home Loan Review Singapore

Maybank Home Loan Review Singapore

Citibank Home Loan Review Singapore

Standard Chartered Home Loan Review Singapore

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Clara Lim

I used to be MoneyDumb. I hung out at H&M every day and thought that a $50 lunch set was a good deal. These days, I spend my time researching the crap out of life and trying to maximise utility on micro-decisions. I'm not sure if that's an improvement.