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30-09-13, 12:55
http://www.businesstimes.com.sg/premium/top-stories/new-dbs-loan-big-hit-hdb-flat-owners-20130930
Published September 30, 2013
New DBS loan a big hit with HDB flat owners
Over 80% refinance from HDB, or are first-time customers
By Siow Li Sen [email protected]
[SINGAPORE] Thousands of HDB homeowners are turning to DBS Bank for a mortgage product that guarantees savings.
Those who took up a POSB HDB loan when it was launched in April could be looking at savings of as much as $1,600 by next month, calculations from DBS showed.
According to Lui Su Kian, DBS's head of deposits and secured lending, the POSB HDB loan has attracted "five times more new customers than a year ago", making up for some of the slack in the private-home loan market.
The bank has received "a few thousand applications over the past five months" and the loan now accounts for 25 per cent of new bookings, Ms Lui revealed in a recent interview with The Business Times, while declining to disclose the amount of loans garnered so far.
Sales since the April launch are worth an estimated $600 million, BT understands.
HDB home loans used to form 15-20 per cent of total new home-loan applications for DBS before the slew of restrictions which has dampened home purchases.
The latest restriction introduced at the end of June, the Total Debt Servicing Ratio (TDSR) framework, prohibits banks from approving a home loan that pushes the buyers' monthly debt service to more than 60 per cent of their monthly gross income.
Even as new home-loan sales have fallen 20-30 per cent, according to bank chiefs in August at second-quarter results briefings, Ms Lui said DBS's mortgage sales team seems busier than ever, thanks to the "number of homebuyers who are taking a HDB loan from us".
"The majority of customers, over 80 per cent, are refinancing from the HDB, or are first-time bank customers," she added.
Since the rules were relaxed in 2003 to allow banks to offer HDB home-loan financing, the majority of buyers have stayed with the HDB despite the lower bank rates because they feel safer, knowing that the government rarely tosses anyone out of their homes when they run into financial problems.
Last year, two-thirds of the 59,000 HDB homebuyers took a loan from the HDB paying the 2.60 per cent concessionary rate. It is this group that DBS hopes to target with its product that charges 1.75 per cent.
The first POSB HDB loan pilot launch - where homebuyers enjoyed a floating-rate loan with interest capped below the HDB concessionary rate for 10 years - was fully sold.
The bank is now into its second offering, which charges the same rate but for eight years, said Ms Lui.
The current POSB HDB loan charges for the first eight years the three-month Sibor (Singapore interbank offered rate) plus 1.38 per cent, capped at the CPF Ordinary Account rate. The current CPF Ordinary Account rate is 2.50 per cent.
Thereafter, the loan charges three-month Sibor plus 1.48 per cent. The September three-month Sibor is 0.374 per cent.
The HDB concessionary loan now charges 2.60 per cent, which consists of 0.10 per cent plus the CPF Ordinary Account rate of 2.50 per cent. Based on the three-month Sibor of 0.38 per cent, borrowers who switch from the HDB concessionary loan will pay a lower interest rate of 1.75 per cent.
For a homebuyer refinancing from the HDB in April, based on a loan of $400,000 and 25-year tenor, the potential savings over six months amount to $1,684.
And should interest rates rise over the next eight years, DBS guarantees that it will be capped at the CPF Ordinary Account rate of 2.50 per cent or 0.10 per cent below the HDB concessionary rate.
As most borrowers use their CPF savings to pay their mortgage instalments, switching to the bank's loan means more savings are left in the CPF account to enjoy the princely rate of 2.50 per cent.
All HDB homebuyers are eligible for the POSB HDB loan, which also throws in a cash rebate of $1,800 to help with legal and valuation fees.
"Mortgage is a long-term financial commitment and there is a certain level of inertia once a homebuyer settles on the loan," Ms Lui had said in April when the product was launched.
It is important for HDB homebuyers to consider loan options outside of the HDB concessionary loan during their purchase process as paying more for it will "wipe out your CPF balances", she said.
DBS has the highest HDB loan market share at 30 per cent of new loans, the bank said. Its HDB loan portfolio is almost $10 billion, or about up 25 per cent of the bank's Singapore mortgage book, Ms Lui said then.
Published September 30, 2013
New DBS loan a big hit with HDB flat owners
Over 80% refinance from HDB, or are first-time customers
By Siow Li Sen [email protected]
[SINGAPORE] Thousands of HDB homeowners are turning to DBS Bank for a mortgage product that guarantees savings.
Those who took up a POSB HDB loan when it was launched in April could be looking at savings of as much as $1,600 by next month, calculations from DBS showed.
According to Lui Su Kian, DBS's head of deposits and secured lending, the POSB HDB loan has attracted "five times more new customers than a year ago", making up for some of the slack in the private-home loan market.
The bank has received "a few thousand applications over the past five months" and the loan now accounts for 25 per cent of new bookings, Ms Lui revealed in a recent interview with The Business Times, while declining to disclose the amount of loans garnered so far.
Sales since the April launch are worth an estimated $600 million, BT understands.
HDB home loans used to form 15-20 per cent of total new home-loan applications for DBS before the slew of restrictions which has dampened home purchases.
The latest restriction introduced at the end of June, the Total Debt Servicing Ratio (TDSR) framework, prohibits banks from approving a home loan that pushes the buyers' monthly debt service to more than 60 per cent of their monthly gross income.
Even as new home-loan sales have fallen 20-30 per cent, according to bank chiefs in August at second-quarter results briefings, Ms Lui said DBS's mortgage sales team seems busier than ever, thanks to the "number of homebuyers who are taking a HDB loan from us".
"The majority of customers, over 80 per cent, are refinancing from the HDB, or are first-time bank customers," she added.
Since the rules were relaxed in 2003 to allow banks to offer HDB home-loan financing, the majority of buyers have stayed with the HDB despite the lower bank rates because they feel safer, knowing that the government rarely tosses anyone out of their homes when they run into financial problems.
Last year, two-thirds of the 59,000 HDB homebuyers took a loan from the HDB paying the 2.60 per cent concessionary rate. It is this group that DBS hopes to target with its product that charges 1.75 per cent.
The first POSB HDB loan pilot launch - where homebuyers enjoyed a floating-rate loan with interest capped below the HDB concessionary rate for 10 years - was fully sold.
The bank is now into its second offering, which charges the same rate but for eight years, said Ms Lui.
The current POSB HDB loan charges for the first eight years the three-month Sibor (Singapore interbank offered rate) plus 1.38 per cent, capped at the CPF Ordinary Account rate. The current CPF Ordinary Account rate is 2.50 per cent.
Thereafter, the loan charges three-month Sibor plus 1.48 per cent. The September three-month Sibor is 0.374 per cent.
The HDB concessionary loan now charges 2.60 per cent, which consists of 0.10 per cent plus the CPF Ordinary Account rate of 2.50 per cent. Based on the three-month Sibor of 0.38 per cent, borrowers who switch from the HDB concessionary loan will pay a lower interest rate of 1.75 per cent.
For a homebuyer refinancing from the HDB in April, based on a loan of $400,000 and 25-year tenor, the potential savings over six months amount to $1,684.
And should interest rates rise over the next eight years, DBS guarantees that it will be capped at the CPF Ordinary Account rate of 2.50 per cent or 0.10 per cent below the HDB concessionary rate.
As most borrowers use their CPF savings to pay their mortgage instalments, switching to the bank's loan means more savings are left in the CPF account to enjoy the princely rate of 2.50 per cent.
All HDB homebuyers are eligible for the POSB HDB loan, which also throws in a cash rebate of $1,800 to help with legal and valuation fees.
"Mortgage is a long-term financial commitment and there is a certain level of inertia once a homebuyer settles on the loan," Ms Lui had said in April when the product was launched.
It is important for HDB homebuyers to consider loan options outside of the HDB concessionary loan during their purchase process as paying more for it will "wipe out your CPF balances", she said.
DBS has the highest HDB loan market share at 30 per cent of new loans, the bank said. Its HDB loan portfolio is almost $10 billion, or about up 25 per cent of the bank's Singapore mortgage book, Ms Lui said then.