OCBC Singapore announced recently their OHR mortgage rates will increase after July 2018. We looked at the history of this short-lived mortgage rate.
History of OCBC OHR
OHR is short for OCBC Home Rate. It was introduced in late 2017 for Singapore residential home loans. It was launched at 1.00% p.a and was derived from the long-term average of 1-month & 3-month SIBOR in the last 12 years (2005-2017). This benchmark would be reviewed based on long-term trends of market rates and it does not fluctuate with market rates. The bank positioned it as a long-term stable rate which was in the interests of mortgage customers.
On first glance, we had many questions.
- Is it a board rate, disguised as OHR?
- Is it benchmark to rolling 12 years (example 2008-2020)?
- How is long-term average of 1-month & 3-month SIBOR computed?
The short answers are:
- There is no fixed or defined formula that anyone outside OCBC can reference, to derive OHR.
- OCBC decides on the average. No wonder we are unable to derive 1.00% no matter how we calculated the average.
- They choose the 12-years period. It could well be 2005-2017 or 2006-2018 at their discretion.
It is a BOARD RATE after all.
Due to the popularity of fixed deposit-linked and fixed rates, the take-up rate was lukewarm from our experience. The bank stopped marketing home loans linked to OHR since July 2018.Since then, the bank also announced an increment of 0.30%. We are informed not all customers on OHR-linked home loans are affected. Hmm, this could mean the bank differentiate batches of OHR even though this rate was marketed as a single version.
Concerned OCBC customers should review their OHR-linked mortgages with the current refinancing rates.