Published April 26, 2006

Case: Banks should offer smaller housing loans


CASE - the Consumer Association of Singapore - is thinking of urging banks and financial institutions to make small loans to help public flat upgraders.

Mr Yeo: says banks should be flexible with minimum loan amounts

The consumer watchdog brought attention to this issue yesterday at a press conference, saying that many people are concerned about having to borrow too much. Case has been approached twice within the past few days by would-be borrowers.

Case says that the Housing and Development Board (HDB) has changed its housing loan regulations, so that buyers not eligible for a HDB loan need to approach banks or financial institutions to obtain one. As a result, some home buyers are saddled with bigger loans, way above what they have set out to borrow.

Citing an example, Case said that a Hougang resident who wanted to upgrade needed only a loan of $30,000 to finance his purchase, after using his CPF and proceeds from the sale of his previous flat. He approached many banks but to no avail, eventually having to obtain a finance-company loan of $60,000, a figure twice the level he required.

The president of Case, Yeo Guat Kwang, who was 'shocked' when he first heard about this, said: 'Initially we thought that since the market has opened up, banks will provide such a loan product that will be made available to all. However this was not the case. When asked why, banks only told us that this was their internal policy.'

From a recent survey carried out by Case, it found that the minimum amount for a bank loan ranged from $80,000 to $100,000.

'We would like to call on the banks to exercise more flexibility because consumers will be adversely affected by this rigidity as this means that the cost of borrowing for the consumer is high,' said Mr Yeo.

For new and resale flats, HDB offers a housing loan limit of up to 80 per cent of the flat's cost for those applied before July 19 last year, and up to 90 per cent of the flat's cost for applications on or after this date.

Kevin Lam, head of loans division of United Overseas Bank, said: 'This minimum loan quantum is set, based on market demand as well as commercial viability.'

The banks BT contacted also wanted to highlight that customers usually take up a loan amount higher than or equal to the minimum loan amount. Applications for loan amounts below the minimum quantum were, as DBS puts it, 'negligible'.

The banks assured BT that they will continually 'review market conditions' and 'make adjustments', stating that they may consider the feasibility of offering lower-quantum HDB home loans in line with market conditions.

Gregory Chan, head of consumer secured lending of OCBC Bank, said: 'For the few requests we get for home loan amounts that are below the minimum . . . we have been addressing them on a case-by-case basis.'