http://www.businesstimes.com.sg/arch...-uob-observers

Published August 07, 2012

Govt's target is speculative fever, not UOB: observers

Some bankers say UOB rap won't put them off introducing innovative products

By Siow Li Sen


[SINGAPORE] The government's criticisms of United Overseas Bank (UOB) over its recent innovative home loan offerings are part of its ongoing efforts to rein in speculation in the property market, said observers.

In the past two weeks, UOB has been ticked off - raising questions about its 50-year home loan and instant home loan approval service.

Some rival bankers said that they would not be put off from introducing innovative products to customers even as they regard UOB's efforts as an attempt to stand out from the rest in a very competitive market.

"It's (mortgages) very commoditised, banks want to show they are different," said one rival banker.

Indeed, UOB continues to offer the products even as it rides out the firestorm, affirming that the 50-year mortgage is an option for younger borrowers. It had explained that the split-second service assesses a serious home buyer's eligibility for a home loan instantly at selected showflats.

Last week, MAS took UOB to task over its Split-Second Home Loan approval service, with a reminder to all banks that rules do not permit home loan applications to be approved at showflats, whether in-principle or otherwise, verbal or in writing.

On Sunday, Minister for National Development Khaw Boon Wan, the latest to tick UOB off, called its 50-year home loan a "gimmick", and said that home buyers should not fall for it as it doesn't make sense.

"The government is not attacking the bank. What it wants is not to have another round of speculative fever," said CIMB research head Kenneth Ng.

Mr Ng said that the speculative fever seemed to have been arrested in the high-end market due to measures such as the additional buyers' stamp duty but sales volumes are at record levels.

"A lot of people are buying mickey mouse units because interest rates are so low, they think they can afford it. A lot of moms and pops are buying in the suburban market."

Developers have sold 11,928 non-landed private homes excluding executive condos (a public-private housing hybrid) in the first half of 2012 - or 75 per cent of the 15,904 units sold in the whole of 2011.

Analysts predict a full-year 2012 tally of 18,000-22,000, surpassing 2010's record of 16,292 units.

The bulk of units sold are in the mass market or Outside of Central Region (OCR).

Based on caveat data, OCR's share was a formidable 63.9 per cent in 2011 and 75 per cent in H1 2012.

Mr Ng said that the record-low interest rates mean that it was almost a free loan to buy an asset given the much higher inflation of 5 per cent-plus.

"Long-term mortgage rates are over 3 per cent," he said.

But in the past five years, because of the global financial crisis with the United States keeping interest rates low, mortgages are charging 1-2 per cent.

Mr Ng thinks that it is good to remind people to be sensible.

The Monetary Authority of Singapore (MAS) had late last month said that it was monitoring UOB's 50-year home loan, the longest term loan available here.

"MAS does watch carefully all the banks' credit underwriting standards and how they push credit products," said MAS deputy managing director Teo Swee Lian. "Where necessary, we would take action."