INTEREST rates have been sliding for months, yet it is only now that the first cut in mortgages is appearing. And it was Maybank that fired the first shot.
Maybank unveiled yesterday a promotional 1.68 per cent fixed rate, significantly lower than the 3.5 per cent average rate offered by some rival banks. The rate applies to the first year of a three-year mortgage package but will be available only for the next three weeks.
It has been a long time coming for market watchers, who have been predicting for months that plummeting interest rates will flow through to home loans, perhaps even igniting a mortgage rate war.
Despite the Singapore Interbank Offered Rate (Sibor) - the level banks lend money to one another - falling by a half to 1.5 per cent early this month from a year ago, no bank had budged.
Maybank took the first step yesterday, when the Sibor sank further to 1.44 per cent.
Its teaser rate of 1.68 per cent for the first year rises to 2.68 per cent for the second year and 3.38 per cent for the third and final year of the loan, which applies to private or HDB mortgages. The customer will be 'locked in' for three years.
The aggregate three-year rate is 7.74 per cent, which Maybank says is lower than the HDB's 7.8 per cent concessionary rate. The 'blended' rate - the average rate per year for three years - is 2.58 per cent.
Maybank is dangling the promotional rate for just three weeks, as it expects interest rates to head north again in the coming months.
Ms Helen Neo, Maybank Singapore head of consumer banking, said while interbank rates had softened over the past few months, the bank 'expects interest rates to rebound in view of rising inflation in Singapore'.
The bank hopes its short and sweet promotional package, which is open only to new customers, will secure for it a bigger slice of a fiercely competitive market.
If its rivals are worried, they are not showing it.
United Overseas Bank (UOB) said it was 'closely monitoring the situation'.
Mr Gregory Chan, head of OCBC Bank's secured lending, said the bank 'will review the situation before making any decisions on adjusting the rates of our packages'.
Banks, however, may find themselves under greater pressure to cut rates for fixed- and variable-rate mortgages if interest rates keep tumbling.
That, of course, is the great unknown. The difficulty in predicting where rates are headed has led banks to keep their powder dry.
Mr Tan Chia Seng, Citibank Singapore's business director, said 'interest rate movements have been difficult to predict'. Citibank 'constantly reviews' its rates to ensure these are competitive, he said.
Standard Chartered Bank's (Stanchart's) head of mortgages, Mr Stuart Kamp, said: 'We are not advising our customers to switch to fixed-rate loans yet, as we expect interest rates to trend down for the rest of the year.'
A DBS Bank spokesman said 'for now, there is no plan to adjust rates'.
She said the bank would keep its 'transparent mortgage packages', which had rates pegged to the 12-month Sibor, as well as the Central Provident Fund Ordinary Account rate. Currently, the rate on DBS' managed mortgage with a 12-month Sibor is about 2.875 per cent.
OCBC, UOB and Stanchart offer mortgage packages linked to transparent rates like the swap offered rate, or SOR, which comprise the Sibor plus a bank's lending costs.
These offer rates lower than fixed-rate packages, as they allow customers to benefit from declining interest rates.
OCBC's package, for example, charges a premium of 1 per cent on top of a three-month SOR. This means that the rate is currently about 2.46 per cent.
Banks said the transparent packages had attracted strong interest from customers in recent months.
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