Published August 22, 2008

Stanchart launches transparent home loan pegged to Sibor

Package has offset feature - interest earned on deposit can cut loan interest


STANDARD Chartered Bank has upped the ante in the mortgage market here with a new transparent home loan pegged to the Singapore interbank offered rate (Sibor). The loan comes with an offset feature where customers can use the interest earned on their deposits to reduce the interest payable on their home loan.

MortgageOne Sibor loans will be priced at 0.8 per cent a year above the three-month Sibor for the first three years.

Customers enjoy the same interest rates as their mortgage loan on two- thirds of the deposits linked to MortgageOne Sibor, subject to a maximum of their loan principal outstanding.

The remainder of the deposits will enjoy an interest rate of 0.5 per cent a year.

By paying less interest every month, customers can repay their mortgage loan faster compared with a traditional mortgage loan.

Under this loan package, customers can put any surplus funds in their current account to reduce interest costs.

They also have the flexibility to withdraw these funds at any time and capitalise on investment opportunities.

'MortgageOne Sibor is designed for all customers,' said Dennis Khoo, general manager of lending at Standard Chartered Bank Singapore.

'For example, for a $500,000 mortgage loan with a 25-year tenure, a customer can reduce interest payments by 20 per cent, just by saving $500 every month.'

DBS Bank said it was the first to offer Sibor- pegged interest rates early last year, after it launched the CPF ordinary account pegged rates under its flagship POSB Home Ideal product in November 2006.

Under the DBS Managed Mortgage, customers can choose between the three-month and 12-month Sibor benchmark and the loans are priced between 0.8 and 1.25 per cent a year above the benchmark, depending on the period of commitment.

Other big players in the home loan market here, however, do not seem to be pressured to launch Sibor- linked loan packages as yet.

'There are many different housing loan packages in the market today. Ultimately, what matters to the home loan borrower is that he is given a choice of which home loan package best suits his needs and his reading of the interest rates trend,' said Gregory Chan, head of secured lending at OCBC Bank.

The bank currently offers fixed and variable packages as well as the swap offer rate package, which is a customised home loan with interest rates that are pegged to the three-month Singapore dollar swap offered rates (SOR), starting from one per cent above SOR for the first two years and 1.25 per cent above SOR thereafter.

Maybank told BT yesterday it does not have any immediate plans for Sibor- pegged home loans at the moment.

Its home loan single board rate stands at 3.75 per cent a year currently and is benchmarked against interbank rates, market conditions, as well as business costs.