BT : Banks roll out more attractive home loans

Business Times - 13 Feb 2010

Banks roll out more attractive home loans

Homebuyers benefit as rivals scramble to match lower rates of market leader DBS

By SIOW LI SEN

(Singapore)

HOMEBUYERS should rejoice as it looks like a home loan war is afoot.

DBS Bank has been lowering its home loan rates, forcing rivals to scramble to match its offerings in order to prevent the mortgage giant from gobbling their market share. The bank said that, last month alone, it enjoyed a more than 50 per cent increase in mortgage applications.

BT understands that HSBC, for one, is countering that with what some call 'guerilla tactics'. Next week it will launch a special home loan package, but the offer may be valid only for a short time - to get customers to commit before the competition can react.

DBS has cut its rates several times in the last two months - a fact that has not gone unnoticed by analysts who say that DBS's recent aggressive moves to sell loans under its new chief executive is a headache for other banks.

'DBS has always been the market spoiler, dating back to the late 1990s,' said Morgan Stanley analyst Matthew Wilson.

A recent Credit Suisse report noted that chief executive Piyush Gupta said the bank has the lowest cost of deposits, after all. 'We have already seen the best home loan package coming from DBS recently,' said Credit Suisse.

For the fourth quarter of 2009, DBS grew its housing loans 7 per cent, and 12 per cent over 2008.

DBS's most aggressive package brings the spread it is charging borrowers back to pre-crisis levels and is less than half of what it was some 24 months ago.

For its 3-month Sibor (Singapore interbank offered rate ) plus package, it is charging a spread of 0.5 per cent and 0.75 per cent for the first and second years, respectively.

Citibank said that, as of Feb 10, it is charging a spread ranging from 0.8 to 1.25 per cent. It also offers the widest selection of Sibor tenors in the market, from one month to three years.

This means clients can take advantage of the low one-month Sibor now and then change to a 12-month Sibor later when they feel that interest rates are likely to rise, thereby fixing the rate on their instalments for that period.

Conversely, a client who has chosen a 6-month Sibor initially can switch to a one-month Sibor if he believes that interest rates could ease in the coming months, Citibank said.

DBS said its popular 3-year fixed-rate package charges from 1.99 to 2.19 per cent.

'The fact is, DBS offers the widest suite and most competitive home loan packages in town,' said Jeremy Soo, DBS managing director, consumer banking group, Singapore.

'Our fixed-rate packages remain very popular, with more than 60 per cent of our customers opting for them,' he said.

'The response is not surprising as they were designed specifically to give homeowners both the certainty in repayments (over the three years) and still enjoy the flexibility to make partial repayments. This flexibility is usually not found in fixed-rate packages,' he added.

'Our momentum has been very good. Month-on-month, in January alone, we saw a more than 50 per cent increase in applications,' Mr Soo said.

Asked about its coming promotion, an HSBC spokesman said the bank is very happy with the growth of its mortgage business for 2009 and the market share it achieved.

'For 2010, we are continuing with this approach, which we are confident will help us to build on the momentum we achieved to attract and win more customers to our proposition. Watch this space.'

Vibha Coburn, Citibank Singapore business director for secured finance, said that while having competitive rates is important, 'we strongly believe that providing innovative value-added products and good after-sales service is just as important'.

United Overseas Bank (UOB) said it will continue to be prominent in the home loan scene. 'We will compete, but not on pricing alone,' said Eddie Khoo, the bank's head of personal financial services.

A UOB spokeswoman added that the bank reviews its product offerings on an ongoing basis to meet the changing needs of homebuyers.

'As everyone's situation is different, customers are encouraged to visit any UOB branch or speak to any UOB mobile banker for a package customised to their needs.'

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