Maybank home loan deal may spark refinancing war

Source : Business Times - 6 Mar 2009

Maybank has fired the first salvo in what is likely to become the 2009 home loan refinancing war, as new property transactions slow down and banks try to poach one another’s customers to boost their mortgage books.

The bank yesterday announced a three-year fixed rate home loan refinancing package, throwing in free legal and valuation fees.

The interest rate for the first year starts at 1.6 per cent, rising to 2.2 per cent and 2.9 per cent for the second and third year respectively.

The catch is that the loan, which is also open to new home buyers, is available for up to only 70 per cent of valuation price. This is lower than current packages which offer financing for up to 80-90 per cent of valuation.

In addition, the package is only for lower risk owner-occupied and completed properties. There is also no minimum loan amount required for application.

With a fixed rate of 1.6 per cent per annum for the first year, Maybank’s refinancing package places itself as the lowest fixed-rate deal in town.

United Overseas Bank’s three-year fixed-rate package charges 3.25 per cent per year.

For borrowers looking at interbank plus packages, banks have jacked up their spreads as they turn risk averse. Sibor, the wholesale interbank rate, is hovering at just 0.68 per cent, taking it near the all-time low of 0.56 per cent in June 2003.

At DBS, a home buyer taking a Sibor package would have to pay the Sibor rate plus 1.75 percentage points.

A DBS spokeswoman said that the bank remains the only bank to date to offer full transparency for all home loans.

‘To offer customers peace of mind, the packages are pegged to publicly known rates like the interbank rates (offered under DBS Home Advice) and CPF Ordinary Account rate (offered under POSB Home Ideal),’ she said.

Maybank’s three-year fixed rate package works out to an average of 2.23 per cent per annum over three years, which is lower than the HDB concessionary rate of 2.6 per cent.

It said that refinancing customers also stand to enjoy fully subsidised legal and valuation fees if the loan amount is $400,000 and above for private properties, or $250,000 and above for HDB flats.

‘Prudent financing considerations should extend beyond short-term Sibor fluctuations,’ said Helen Neo, head of consumer banking at Maybank. ‘There is no guarantee that Sibor will keep trending downwards. We are confident that people will welcome the peace of mind that fixed rate packages can offer particularly in such times of volatility.’