In 2024, mortgage refinancing activity in Singapore saw a significant uptick as fixed mortgage rates dipped below 3% after the second quarter. Both private homeowners and HDB flat owners actively pursued refinancing and repricing options, capitalising on the favourable interest rate created by consecutive rate cuts from the US Federal Reserve starting in September.
Refinancing typically involves obtaining a new loan from a different bank after the lock-in period of an existing loan ends. In contrast, home loan repricing refers to switching to a different loan package within the same bank once the lock-in period expires. These options gained popularity among borrowers seeking to reduce their financial commitments.
Home loan refinancing transactions surged in 2024
UOB reported an 85% increase in HDB loan refinancing transactions in 2024 compared to the previous year. From June to November 2024 alone, the bank observed a 60% year-on-year rise in such activities. For private residential loans, refinancing transactions increased by nearly 15% during the same period.
Similarly, DBS experienced a surge in applications for fixed-rate home loan packages, particularly for one- to three-year options ranging from 2.6% to 2.9%. A sharp rise in activity occurred between September and November 2024 as borrowers moved away from floating rates, which remained higher than fixed-rate offerings. This trend marked a shift from the customers’ cautious approach observed earlier in the year.
Further driving this momentum, DBS’ POSB HDB home loan experienced a 70% jump in monthly new bookings during October and November 2024. This followed the bank’s introduction of three- to five-year fixed-rate packages with rates as low as 2.5%.
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Competitive mortgage rates for home loans
Financial institutions played a pivotal role in boosting refinancing activity by offering competitive packages and attractive perks. Some banks introduced five-year fixed-rate packages at 2.5%, which fell below the HDB concessionary interest rate of 2.6%.
These offerings appealed to homeowners anticipating further rate cuts. Many viewed refinancing as a strategic move, confident that additional reductions in interest rates would present future opportunities to refinance again.
Although the rise in refinancing was substantial, it did not match the surge seen between mid-2019 and early 2020, when interest rates dropped more sharply. Nevertheless, private homeowners responded actively to falling rates, particularly from August to December 2024, as three-year fixed-rate packages dropped below 3%, down from earlier rates of 3.3% to 3.5%.
Aggressive promotions, such as free conversions within lock-in periods and higher cash rebates, further incentivised refinancing. Free conversions enabled borrowers to switch to lower-rate packages without waiting for the lock-in period to end, proving beneficial in a declining interest rate environment.
Read more: Deciding between HDB loan vs bank loan? Here’s a quick reference
Uncertain mortgage rates in 2025
While 2024 saw significant drops in mortgage rates, the outlook for 2025 remains less certain. The US Federal Reserve has indicated a potential slowdown in rate cuts, with only two quarter-point reductions anticipated compared to the four implemented in late 2024. This moderation may limit further declines in Singapore’s short-term rates, such as the Singapore Overnight Rate Average (SORA), which influences mortgage rates.
Industry experts predict more subdued refinancing activity in 2025 unless global economic conditions prompt further interest rate adjustments. However, homeowners with existing loans exceeding 3% may still find refinancing worthwhile if new packages remain closer to the 2.5% to 2.8% range.
Read more: Singapore Property Market Year-End Review 2024 And 2025 Outlook
What to consider before refinancing home loans
When considering refinancing, homeowners should first determine if there are penalties, as many home loan packages include a lock-in period of two to three years. It is also important to assess whether the new package provides flexibility for potential changes, such as selling the property, making penalty-free partial repayments, or adapting to fluctuating interest rates.
Additionally, do evaluate switching costs, such as legal fees and property valuation expenses. These costs may not always be fully covered by subsidies from the new financiers. As interest rates evolve, borrowers should remain vigilant, considering both the immediate savings and long-term implications of refinancing decisions.
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