POSB mortgage plan leads market: DBS

Source : Straits Times - 14 Aug 2008

It says half the buyers ineligible for HDB loans have Home Ideal package

DBS BANK says it has reached a decisive milestone in its renewed efforts to grab a bigger slice of the Singapore mass mortgage market with its POSB brand.

It adds that it has pulled ahead of rival banks in offering loans to HDB flat dwellers.

The bank says it has captured more than half of the market for loans to Singaporeans who are not eligible to take up a Housing Board concessionary loan.

The HDB currently provides loans for 60 per cent of flat resale transactions, with banks in Singapore offering the remaining 40 per cent. Of this latter group, one in two Singaporeans currently has a POSB Home Ideal mortgage, which offers transparent interest rates.

In 2003, the HDB liberalised the market to allow Singapore banks to serve this customer base. Two years later, there were a handful of players battling neck and neck for customers, including Hong Leong Finance, OCBC Bank and DBS.

In 2006, DBS started to pull ahead after launching its flagship POSB Home Ideal product with interest rates pegged to the Central Providend Fund (CPF) Ordinary Account rate.

This product offered the stability and transparency that appealed to HDB homebuyers and helped POSB to notch up an all-time record of sales during one month in the second quarter of this year, said Mr Koh Kar Siong, DBS’ head of consumer deposits and secured lending, in an interview yesterday.

Over the past three years, POSB has seen a compounded annual growth rate of 20 per cent in its HDB home-loans business.

And growth was still sizzling in the second quarter of this year. POSB saw a 22 per cent rise in the number of new mortgage accounts in this period, compared to the preceding three months. Meanwhile, loan volumes grew by more than a third.

During this period, the total number of resale transactions increased 22 per cent to hit 7,760, compared with the preceding three months.

DBS chief executive Richard Stanley has declared that POSB will be relaunched. It will celebrate its long history by offering better service and more products to Singaporeans, as part of his strategy to aggressively grow the bank’s Singapore and Hong Kong business.

With more than 70 per cent of people in Singapore living in an HDB flat, the Housing Board mortgage market is - not surprisingly - high on POSB’s agenda for aggressive expansion.

Mr Koh acknowledged that loans growth is expected to moderate in the coming months, as buyers and sellers of flats take a ‘more prolonged time’ to negotiate and complete transactions.

But POSB will still be coming up with ways to enhance its Home Ideal mortgage in order to attract ‘even more significant market share’, he said.

The best price in the market is the current 2.6 per cent annual rate for those who qualify for an HDB concessionary loan. This rate is pegged at 0.1 per cent above the prevailing CPF interest rate.

But for those who need to take up a bank loan, the POSB Ideal package’s average annual interest rate over three years is 3.1 per cent.

This is based on the first-year rate of the CPF rate plus 0.25 per cent; the CPF rate plus 0.5 per cent in the second year; and the CPF rate plus 1 per cent in the third.

This compares with 3.5 per cent for the variable-rate loans offered by United Overseas Bank as well as OCBC, and an average of 3.18 per cent over three years for a Hong Leong Finance variable-rate loan.