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Thread: DBS targets HDB flat buyers with new home loan

  1. #1
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    Default DBS targets HDB flat buyers with new home loan

    http://www.straitstimes.com/archive/...-loan-20130401

    DBS targets HDB flat buyers with new home loan

    Published on Apr 01, 2013

    By Magdalen Ng


    DBS Bank has launched a new home loan targeted at the HDB home buyer, with interest rates that are more attractive than that of the concessionary loan offered by the Housing Board.

    The POSB HDB Loan will have its interest rate capped at the Central Provident Fund's (CPF) Ordinary Account rate, which is 2.5 per cent, for 10 years. The loan also has no pre-payment charges.

    For the first 10 years, the interest rate will be the three- month Singapore Interbank Offered Rate (Sibor) plus 1.38 per cent. Thereafter, it will be the three-month Sibor plus 1.48 per cent. In the recent months, the three-month Sibor has been hovering at the 0.35 per cent mark.

    At current interest rates, the monthly repayment for a 30-year loan of $320,000 under the POSB HDB Loan will be more than $100 less than that of the HDB concessionary loan.

    The HDB concessionary loan is pegged at 0.1 percentage point above the CPF's Ordinary Account rate, which works out to 2.6 per cent currently.

    Last year, two-thirds of the 59,000 HDB home buyers took the HDB loan.

    DBS head of deposits and secured lending Lui Su Kian said that the POSB HDB Loan was designed after the bank realised that customers would rather pay a fixed, but higher rate.

    She said: "There is a certain level of inertia once a home buyer settles on the loan. It is important for HDB home buyers to consider loan options outside of the HDB concessionary loan during their purchase process."

    This loan is available only to HDB owners who are looking to refinance, buyers of resale flats, or those whose Build-To-Order (BTO) flats are close to completion.

    Ms Lui explained that because there is a three- to five-year gap between the purchase and the completion of a new BTO flat, the bank may be vulnerable to interest rate risks, given that the interest rate cap is guaranteed for 10 years.

    For those refinancing their loans, DBS is also offering a $1,800 cash rebate for loans of at least $100,000 to defray legal fees.

    One downside of choosing a private bank loan is that HDB home buyers will have to fork out an initial 5 per cent cash payment, which is not necessary compared with an HDB loan, where it can be paid using CPF monies.

    Ms Lui also noted that while there have been some cases of repossession, these are rare.

    She encouraged bank customers to discuss options with the bank should their financial situation change. "We are here for the long term, and we want to help our customers. If our customers come to us, we can work out a six-month or 12-month plan to help them through difficult times," she said.

    Newly married civil servant Anne Chia, 30, said that the new offering does sound like a good deal, but she will probably have to wait till her flat in Sengkang is ready in 2015 before making a decision.

    "Being able to enjoy cheaper repayments for 10 years is quite enticing. The money saved can be used on other expenses," she said.

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  2. #2
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    Default DBS launches first-of-its-kind HDB home loan

    http://www.businesstimes.com.sg/arch...-loan-20130401

    Published April 01, 2013

    DBS launches first-of-its-kind HDB home loan

    It caps new loan's interest below HDB concessionary rate for 10 years

    By Siow Li Sen


    [SINGAPORE] DBS Bank is going all out to grab a bigger slice of the HDB home loan market; it's offering a first-of-its-kind HDB home loan with guaranteed savings to home buyers for 10 years.

    And critically, that means borrowers will be able to build up their CPF savings while enjoying the highest interest rates in the country in the meantime.

    The Central Provident Fund (CPF) Ordinary Account rate, which has a minimum legislated rate of 2.50 per cent, is multiples higher than the banks' measly savings rate of 0.11 per cent.

    From today, HDB home buyers can get a floating-rate loan with interest capped below the HDB concessionary rate for 10 years, DBS said.

    Called the POSB HDB Loan, it charges for the first 10 years the 3-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 3-month Sibor plus 1.48 per cent.

    The existing 3-month Sibor is 0.38 per cent.

    The HDB concessionary loan now charges 2.60 per cent which is made up of 0.10 per cent plus the CPF Ordinary Account rate of 2.50 per cent.

    Based on the 3-month Sibor of 0.38 per cent, borrowers who switch from the HDB concessionary loan will pay a lower interest rate of 1.76 per cent.

    And should interest rates rise over the next 10 years, the bank 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.

    The savings for a $320,000 loan with 30-year tenor is $49,082, based on the difference between the 2.60 per cent and the 1.76 per cent rates, said DBS.

    And if $49,082 is left with the CPF for 30 years which pays 2.50 per cent interest, the interest earned will amount to $36,812, said DBS.

    On an outstanding HDB loan of $150,000 and 10-year tenor, the saving is $6,809, it said. The interest earned on $6,809 for 10 years at 2.50 per cent will be $1,702.

    As most borrowers use their CPF savings to pay the 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, said Lui Su Kian, DBS Bank head of deposits and secured lending.

    All HDB home buyers are eligible for the POSB HDB Loan which also throws in a cash rebate of $1,800 to help with legal and valuation fees.

    Last year, two-thirds of the 59,000 HDB home buyers took a loan from the HDB paying the 2.60 per cent concessionary rate, and it is this group that DBS hopes to attract.

    Ms Lui said: "Mortgage is a long-term financial commitment and there is a certain level of inertia once a homebuyer settles on the loan."

    It is important for HDB home buyers to consider loan options outside of the HDB concessionary loan during their purchase process as paying more for the HDB concessionary loan 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.

    Also, 60 per cent of HDB owners who refinance to bank loans chose DBS.

    DBS's HDB loan portfolio is almost $10 billion, or about up 25 per cent of the bank's Singapore mortgage book, Ms Lui said.

  3. #3
    Join Date
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    Default

    10y SGS bond yield is now again below 1.4%, looks like DBS is right to place the 2.5% cap for 10y

    1.38%
    Ride at your own risk !!!

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