Maybank's Home Loan Promotion Creates A Buzz

Source : The Business Times, February 22, 2008

Other banks won't get into price war, says OCBC's chief executive

Maybank's promotional home loan package has apparently drawn massive interest from new home buyers and home owners looking to refinance.

But at least one bank here has come out to say that this is unlikely to spark a mortgage price war in Singapore.

Maybank told BT that since the launch on Tuesday till end of Wednesday, the bank had received more than 1,500 inquiries at its call centre and branches. 'We have received close to 200 applications just for one and a half days,' said Helen Neo, head, consumer banking, Maybank Singapore.

She added that there is an equal split of applications for refinancing and new purchases and most of the applications are for private property home loans.

However, she said the promotion is not likely to be extended.

The low rates apply to those taking a loan amount of $300,000 and above and for owner-occupied properties.

On Tuesday, the Qualifying Full Bank slashed its three-year fixed home loan rates from 3.58 per cent for all three years to 1.68 per cent for the first year, 2.68 per cent for the second and 3.38 per cent for the third year. Maybank's new first-year interest rate is about 40 per cent lower than similar packages being offered in the market.

'We expect this promotional package to bring in new home loan customers. With this very attractive package, we do expect to meet the target we set,' said Ms Neo.

In response to Maybank's mortgage rate cut - which he referred to as a 'fire sale' - David Conner, OCBC Bank's chief executive, said banks are unlikely to be dragged into undercutting each other on rates.

'We're not likely to see a big price war with the mortgage portfolio,' said Mr Conner at yesterday's OCBC results briefing. 'We should see pricing firming and not deteriorating.'

He noted that most big multinational banks are strapped for capital and that credit spreads are rapidly rising. 'We have to be more careful with our pricing,' he said, adding that Singapore still remains one of the cheapest places to get a mortgage.

He noted that Singapore's interest rates are low today because the strengthening of the Singapore dollar - designed to stave off inflationary pressure - has attracted liquidity into the market.

He said the strengthening of the currency should slow down in the second half of the year, and liquidity will ebb as people move to other foreign currencies. This will bring down interest rates.

He added: 'Banks do better if interest rates are in the 3, 4 or 5 per cent range.'

DBS Bank had earlier said it has 'no plans to adjust rates' for now, while United Overseas Bank and HSBC both said they would monitor the situation before making a decision.

Citibank and Standard Chartered shied away from saying if they will review rates, but pointed to their Sibor packages, which they say give customers control in repricing loan packages.

Meanwhile, banking industry insiders said that fundamentals of the property market are still there, and that even with talk of the industry demand softening there was no panic selling.

They added that valuations for home prices have not come down and that there is still buying activity among the middle markets.