Banks moving aggressively to capture home loans market from smaller financiers

Singapore’s big lenders are aggressively lowering rates to beat off competition from each other and smaller finance houses in a hot home loans market.

Financiers had the lowest interest rates at the start of the year, but three months on, banks have also started dropping prices.

The Singapore property market is heating up, helping to propel the home loans space.

Competition is stiff among major local banks and financiers, but DBS, OCBC and UOB have been going on the offensive with not just lower prices, but additional services as well.

Moh Tze Yang, lead analyst, SIAS Research, said: “Some developers whom we have met have been approached by several banks to go hand-in-hand with them during their launches, to be able to set up booths there, offering special rates. So we are looking at the banks aggressively chasing the home loans.”

At the end of 2009, Hong Leong Finance was offering some of the lowest rates, with the first-year interest rate for its public housing loan at 1.3 per cent.

But within three months, the banks had fought back.

As of the end of March, DBS’ variable public housing home loan rate for the first year stood at 1.3 per cent, while OCBC’s rates came in at 1.26 per cent.

Hong Leong’s current rates have also come down, standing at 1.23 per cent.

UOB declined to give their rates for the period.

But despite the rapid lowering of rates, observers expect banks and financiers to stop short of a price war.

Christine Kuo, senior analyst, Financial Institutions Group, Moody’s Singapore, said: “After all, the banks understand that a price war does nobody any good. So although they will try to stay competitive, they won’t be making sufficient margins if they continue to undercut.”

Lenders are currently in the process of revising their home loan interest rates for April.

The expectation is that rates will be revised upwards, in light of strong continued interest from home buyers – interest that observers said is not likely to go away any time soon.

Source: Channel News Asia, 6 Apr 2010