Banks poaching home loan customers with sweet offers

Singapore: AS HOME sales continue to slide, banks are going all out to hang on to their existing home loan borrowers.

Some poach from their rivals while others are offering to pay off the penalties that customers may incur making the switch.

Flexibility has become a byword and new packages are getting more imaginative, The Business Times reported yesterday.

In anticipation of interest rates falling even further, one new DBS home loan package offers two free repricings within 24 months.

At United Overseas Bank, customers can fix the monthly payments for 36 months regardless of interest rate changes.

Standard Chartered Bank has begun repricing home loans downwards for existing customers on variable rate packages.

It is understood to be the first bank to do so given the steep falls in interest rates since last December.

The last time banks were proactive in repricing home loans was in 2005 after interest rates rose sharply in the third quarter of 2004. This, in turn, led to several rounds of hikes as the period followed two years of record lows when interest rates went below one per cent.

Stanchart's automatic repricing is for customers who are out of their lock-in periods - those who do not have to pay a penalty if they repay the loan in full.

"We proactively look at the customer base and take the necessary steps to ensure the pricing is competitive; if not, the competition will take them," saidMr Dennis Khoo, Stanchart general manager, lending.

The repricing can take the form of a new package or a lower rate within the existing contract, he said.

For banks looking to grow their mortgage business in a sluggish property market, refinancing or winning over customers from rivals is critical.

In the first quarter, only 795 new private homes were sold, about half the 1,469 units in the preceding quarter.

Repricing though can be a tricky business for borrowers still within their penalty periods because their banks have yet to recover their original costs of selling those loans.

So banks know that one way to poach customers from rivals is by offering to pay the penalty rate which can be hefty - typically 1-1.5 per cent of the outstanding loan.

"It's difficult because they were heavily subsidised in the first year... It depends on the total relationship as the bank may have to stomach the loss," said Mr Khoo.

Mr Koh Kar Siong, DBS managing director and head of secured loans, said clients who are considering refinancing need to assess the interest savings and the costs incurred such as legal fees and any penalties or subsidies payable to the financier.

But refinancing customers should remember that cheaper offers elsewhere still come with some cost, said Mr Gregory Chan, OCBC Bank head of consumer secured lending.

"Home-owners looking for refinancing should approach their existing banks first as the total cost of refinancing with another bank is usually relatively higher and has to be offset by lower interest rates," he said.

Please allow me to contribute as well as do some advertising on your thread.

The banks have been increasing their rates recently, and now the rates are even more absurd than when the rates first dropped in February with Maybank starting the teaser rate of 1.68%. 2.68% and 3.38% fixed for 3 years. Now the banks are instead offering Fixed 3 years @ rates of either 3.98% or 4.18% depending on the banks you go to.

So if you are keen to refinance or get a Loan for your newly purchased property, I suggest you better do it asap before the end of June 30. Kindly refer to my post below.

Hi All,

Last call for Bank A's packages which are DBS. They are withdrawing packages after June 30, so as of today there is still 6 working days before the Letter of Offer has to be signed by latest, June 30.

Till date, of the other few big local and foriegn banks, 2 have raised their 3 years fixed rate to 4.18% while another 2 have increased to 3.98%.

So for people who have bought HDB or Private that are already TOP or nearing TOP in the next 3 months, you may still apply for DBS Fixed 3 years @ 2.98% with 0.75% cash rebate.

As for those who are currently not with POSB/DBS, whether you are still within lock in or already out of lock in, you may apply for DBS Fixed 3 years @ 2.98% with 0.75% cash rebate.

For those who have bought BUC properties that are either Deferred Payment or Progressive Payment, you may like to apply for DBS package which is 12M SIBOR + 1% which has no lock in so there is so partial or full redemption penalty for disbursed Loans, with only 0.75% cancellation charge for the undisbursed portion. As SIBOR is on the upwards trend with 1.92% as at June 19, if you sign the Letter of Offer in June, you can still enjoy the June 2 SIBOR rate of 1.687%, which brings your rate to 2.687% fixed for 12 months without any lock in penalty, except the cancellation charge of 0.75% for undisbursed portion.

Since I have already publicised that Bank A is DBS, those who have read are welcome to approach them directly. But if you would like to use my service and let me earn some referral fees, and also for appreciation of me sharing all the information upfront, please contact me, Edward Sim @ 9187 2681 or edskh78@yahoo.com.sg to find out more. I do not charge customers for the service.