By Jo-ann Huang
Foreign banks are turning up the heat in the mortgage loan war among banks. Compared with their local counterparts, they are offering much more attractive packages.
Maybank, HSBC, ANZ and CIMB Bank are some of the foreign banks offering tantalising home loan rates here.
Most home loans here are pegged to the Singapore Interbank Offered Rate (SIBOR), which currently stands at 0.44 per cent.
For the first year, Maybank, for instance, offers a loan priced at SIBOR plus 0.5 per cent interest on top of SIBOR, translating to a total of 0.94 per cent per year. HSBC also has a SIBOR-pegged loan package with a 0.9-per-cent premium, equating to 1.34 per cent per year for the first year.
On the other hand, DBS SIBOR-pegged loan package for the first year charges a 1.25-per-cent spread over SIBOR, or 1.7 per cent annually.
Loans pegged to the Swap Offer Rate (SOR) are also available. SOR currently stands at 0.174 per cent.
Analysts say foreign banks are expanding their market share in the region, leveraging on the low interest rate environment here to increase their slice of the pie here.
“Probably through mortgages they feel that they can enhance their presence in Singapore,” said Mr Alfred Chan, director of financial institutions at Fitch Ratings. “And Singapore being a financial hub is being seen as a stop centre for many countries in the region.”
Experts said offering the most attractive home loans is the only way foreign lenders can compete with the local banks.
“The foreign banks have no choice but to entice home buyers to switch to them by offering very attractive packages,” said Mr Dennis Ng, chief executive officer at http://www.HousingLoanSg.com.
The SIBOR is pegged to US interest rates. With US unemployment reaching a two-year low at 8.9 per cent, experts said the cheap credit environment may soon be a thing of the past.
“Foreign banks do not have a very large deposit base to draw their Singapore dollar funds from, so most of the foreign banks are net borrowers in the Singapore interbank market.
“So, if the SIBOR goes up, it means that the foreign banks have to pay more to borrow from the interbank market, in order for them to offer home loans,” said Mr Ng.
“This is the reason why when the SIBOR goes up, the foreign banks are affected more adversely than the Singapore banks that have a large deposit base they can borrow from,” he said.
Despite the moderating property sales here, experts say the home loans market should remain strong, adding that the refinancing segment in Singapore alone is worth S$100 billion.