Mortgage rates still at rock bottom

Source : Straits Times - 6 Sep 2008

HOMEBUYERS and sellers, hit by the recent market malaise, have at least one comforting constant in a market plagued by uncertainty - low interest rates.

Despite various economic woes - inflation, volatile oil prices, slowing economic growth - Singapore’s banks are continuing to offer rock-bottom mortgages.

The latest to reaffirm Singapore’s low interest rate home loans environment was Malayan Banking (Maybank), which yesterday launched a new three-year variable home loan that offers a low interest rate of 1.68 per cent a year for the first year.

Still, after that, the rates increase to 2.48 per cent for the second year and 2.88 per cent in the third.

Maybank’s new package followed two other home loan launches by Standard Chartered Bank (Stanchart) and HSBC.

Both offer competitive interest rates, albeit through slightly more creative housing loans that are pegged to the Singapore Interbank Offered Rate (Sibor).

Stanchart’s MortgageOne Sibor is priced at 0.9 per cent a year above the three-month Sibor for the first three years.

It comes with a unique offset feature that allows customers to use the interest earned on their deposits to reduce the interest payable on their home loans.

HSBC’s latest Sibor-pegged home loan comes with a progressive interest rate reduction feature - the first of its kind here.

On top of the prevailing three-month Sibor rate, customers pay an additional interest of 0.75 per cent in the first year. The rates fall to Sibor plus 0.65 per cent in the second and, from the third year onwards, Sibor plus 0.55 per cent.

With interest rates so low, many home owners naturally consider refinancing their home loans with packages that are pegged to a faltering Sibor.

DBS Bank head of deposits and secured lending Koh Kar Siong said Sibor-pegged loans offer customers more transparency and also allow them to enjoy lower interest rates in the current market environment.

Mr Gregory Chan, OCBC Bank’s head of secured lending, agreed. He said OCBC customers preferred home loans pegged to market rates because these are ‘more transparent and bear greater significance for consumers during uncertain times’.