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Published August 28, 2010

Maybank 1st yr home loans at under 1%

New housing loan products expected to intensify competition

By CONRAD TAN


MAYBANK Singapore has launched a new range of home loan products with interest rates that start off at below one per cent, a move that could put even more pressure on its rivals already struggling to boost lending income amid low interest rates and loan margins.

The bank is offering five-year fixed-rate home loans that start at just 0.88 per cent for the first year, rising to 2 per cent in the second year, 2.25 per cent in the third year, and 2.5 per cent in the fourth and fifth years. Thereafter, the rate is variable, pegged at 0.5 percentage point below Maybank's adjustable board rate, which is now 3.75 per cent.

A three-year, fixed-rate home loan also starts at 0.88 per cent, climbing to 1.9 per cent in the second year and 2.3 per cent in the third year, after which the variable rate is similarly pegged at a 0.5 percentage point discount to Maybank's board rate.

The rates are cheaper than those currently offered by the three Singapore banks for fixed-rate home loans, a check by BT shows. As an indication of how keen the competition is, DBS Group and OCBC Bank no longer publish their home-loan rates on their websites; only United Overseas Bank still does so.

'Fixed-rate packages are very popular with customers as it gives certainty in financing their mortgage,' said Helen Neo, head of consumer banking at Maybank Singapore. The new home-loan packages are being offered as a 'gesture of appreciation for our customers', she added.

The bank is also offering variable-rate home loans that start at just 0.8 per cent in the first year, based on the current level of the board rate, though that could climb if the bank raises the board rate. Similar variable-rate home loans offered by the Singapore banks charge interest starting at 1.18 per cent or more.

Another home loan product offered by Maybank is pegged to the floating three-month Sibor, or interbank lending rate, now at 0.56 per cent. Interest on that home loan is charged at 0.5 percentage point above Sibor in the first year, one point plus Sibor in the second year, and 1.25 points plus Sibor subsequently.

By comparison, the Singapore banks offer floating-rate mortgages that start at 0.75 percentage point above Sibor, and others that start at 0.75 point above the three-month swap offer rate - now at about 0.3 per cent.

Home loans are by far the biggest component of banks' loan portfolios here. Housing and bridging loans - short-term loans provided by banks to buyers of new homes waiting for cash from the sale of existing property - made up $101.1 billion, or a third, of all Singapore-dollar bank loans outstanding at the end of June, according to central bank data.

The size and long tenure of home loans makes them attractive to banks. But persistently low interest rates have restricted how much banks could charge on new loans, while renewed competition for market share has also squeezed loan margins in recent months, making their lending less profitable. Net interest margins at all three Singapore banks shrank in the second quarter, compared to both the prior quarter and the same period last year.

Maybank Singapore's housing loans grew 10 per cent in the year to end-June to $4.1 billion - just under a quarter of its $17.5 billion loan portfolio, chief executive Pollie Sim said on Wednesday.