Introducing OHR – OCBC’s new home loan package

OCBC recently introduced a brand-new home loan package to the market, known as the OCBC Home Rate (OHR). This rate package was released to replace both the existing board rate and fixed deposit rate loan packages.

Apart from the rates which are currently offered in the market – mainly, the fixed rate, board rate, fixed deposit and SIBOR rate, homeowners will now have another option to consider whether they are signing up for a new home loan or refinancing their existing one.

We tried to find out more about OHR, and the following are some frequently asked questions that we think might help you better understand the packages offered under OHR:

What is OHR?

Simply put, the OHR benchmark is a rate that’s managed directly by the bank and at the time of publication, OHR is at 1.00%.

What is the formula used to derive OHR? 

OHR is not pegged to any market interest rate movements, and is not formula driven either.

Are the spreads guaranteed?

Yes, the spread above OHR is fixed.

What are some advantages of OHR, as compared to other floating rate packages?

When you pit OHR against SIBOR packages, OHR is more stable because it is not revised on Rate Review Dates (RRD).  Basically, there is no RRD for OHR. And because there is no RRD, there is also no commitment fees involved. Thus, OHR gives customers the flexibility to switch package when the rate increases.

On the other hand, if you are comparing OHR to the bank’s board rate, it is more transparent as there is a basis for deriving the 1% value, and there is a long-term view of rates that underlies the benchmark.

Should I take up fixed or floating package?

Although you may enjoy the stability of a 2-year fixed rate, there’s a chance it’s going to be the more expensive option, since the rate is at least 0.30% more than the floating rate at first.

This is especially so after the first 2 years, as the fixed rate becomes consistently more expensive than the floating rate. Do take note of this if you’re keen on the fixed rate.

What else is offered in the OCBC Home Rate package?

  1. One Free Conversion
    OCBC would allow you to switch to another package, if you ever find that the OHR rate increases, without any penalty.
  2. Prepayment of Up to 50%
    After taking up the loan, if you want to pay off loan as much as you can, you are able to do so without any penalty, as long as you maintain a loan amount of 50% during the 2-year lock-in period.
  3. Waive off fire insurance
    It is compulsory to purchase fire insurance if you take up a mortgage loan with other banks. For OCBC, as long as you are insured by the Management Corporation Strata Title (MCST), the management committee of your housing development, you would not be required to pay for fire insurance.

What are other factors that will move OHR in the future?

As mentioned above, the bank will only revise OHR if there is a continual increase in rates over the long term.

Also, if the bank changes the OHR rate, a 30-day notice will be given to the customers. Customers will also get to enjoy a free switch to any other package should OHR increase.

Should I take up OHR package?

Ultimately, OHR helps manage costs as the gradual tiered up pricing reflects future interest costs. Because of this, risks are reduced as the impact of sharp benchmark increases when interest cost increases is mitigated.

Disclaimer: All information is accurate at the time of publication, and may be subjected to changes at the financier’s discretion.

The Redbrick Team

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