Published September 26, 2006

DBS Group, Citibank raise home loan rates again

Hikes of up to 0.5 percentage point driven by increased interbank rates


MORTGAGE interest rates are being increased for the second time this year by two banks in Singapore, DBS and Citibank.

The market leader in home loans, DBS Group, is raising interest rates for its private property and HDB home loans for certain customers, with the hike ranging from 0.15 to 0.5 of a percentage point per annum. The bank has started notifying customers and the rate hikes will take effect from the end of next month.

Explaining the increase, Koh Kar Siong, the bank's managing director, secured loans, consumer banking Singapore, said: 'Despite a steeper increase in the interbank rates over the past few months, we have adopted a moderate approach, and have adjusted some of our rates.

'We last raised our mortgage rates by 0.5 per cent per annum which took effect at the end of March for all existing customers. We review our mortgage rates regularly and will adjust them as and when market conditions necessitate such an adjustment.'

Citibank Singapore is also upping home loan rates for the second time this year. Effective from Oct 1, Citibank is raising home loan rates for existing customers by an average of 0.25-point per annum.

With home loan rates rising in Singapore, Tan Chia Seng, Citibank Singapore's business director for secured assets group, said: 'Feedback from customers with our fixed-rate mortgage packages indicate they are happy that they are not affected by the rate increase.'

As more people worry about rising interest rates, Mr Tan said that more customers, rather than taking a smaller loan quantum or paying their mortgages off early, are putting funds into cash management accounts, which earn interest at a rate that moves in tandem with the prevailing mortgage rate.

Looking ahead, Mr Tan said: 'We do not rule out the possibility of further rate increases, due to market factors.'

Noting that deposit rates and Singapore interbank rates have already risen significantly this year, Mr Tan said: 'The general view is that mortgage rates may rise further, before stabilising towards the end of the year.'

Kevin Lam, head of United Overseas Bank's loans division, said: 'Any adjustments in interest rate would be dependent on market conditions as well as the industry's competitive strategies.'

UOB raised its home loan rates in March and July this year.

At Maybank, which has increased its mortgage interest rates three times this year, Helen Neo, head of consumer banking, said: 'There are no immediate plans to further raise our home loan rates.'

Gregory Chan, OCBC Bank's head of consumer secured lending, said: 'While we have made adjustments to some of our customers' home loan packages in line with interest rate movement, these adjustments were not made across-the-board and affect only select groups of our customers. We will always assess the situation before making any decisions to increase rates.'

Singapore's three-month interbank rate has jumped from about 1.4 per cent at end-2004 to around 3.5 per cent today. Market players note that the increase in home loan rates will boost net interest margins of banks and help their profitability.