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Move in line with Singapore strategy of attracting foreign talent

FOREIGNERS can now borrow up to 90 per cent of a property’s value from Maybank, up from 70 per cent previously. The Malaysian bank said yesterday that the increase is part of the bank’s move to be in line with the broad Singapore strategy to attract and retain foreign talent.

Malaysia’s biggest bank said that customers who place at least $50,000 with it or 10 per cent of the loan, whichever is lower, will be eligible for the new financing scheme.

Helen Neo, Maybank head of consumer banking in Singapore, said: ‘With the upcoming government initiatives such as the Personalised Employment Pass to help highly skilled foreigners become more mobile in the Singapore job market, we are optimistic that many of them will be more willing and ready to purchase homes for the long term.

‘We foresee good demand for our enhanced home loan package for foreigners.’

Although the bank’s portfolio attributed to foreigners is currently ‘modest’, Ms Neo expects it to grow with this package designed for them. ‘We project a threefold increase in our lending to foreigners,’ she told BT, as the bank builds up its home-loan business here.

The number of private homes in Singapore bought by foreigners (including permanent residents) in the second quarter of this year surged 35 per cent from the first quarter to reach 1,152, according to DTZ Debenham Tie Leung.

This is the highest number of foreign purchases within a quarter in a decade. The top five nationalities were Malaysians, Indonesians, British, Indians and Chinese, the real-estate consultant said.

This is the group that Maybank is targeting. The bank said that its current foreign mortgage customers are mostly Asian, who usually buy private homes in districts 9, 10 and 11.

About 80 per cent of them are PMEBs (professionals, managers, executives and businessmen) and the average loan size is at least $1 million, as they tend to purchase higher end properties.

‘Real estate agents like Knight Frank have noted an increase in foreign home buyers, with growing interest among Europeans in Singapore real estate,’ said Ms Neo.

‘Twenty-two per cent of homebuyers are foreigners. We see this trend continuing especially with the positive outlook on the luxury property market, making such properties an attractive investment tool.’

Maybank also lends to Singaporeans, of which 80 per cent is for private properties and the remainder for HDB housing.

For foreigners, the loan will be made at market interest rates, but the amount exceeding the 70 per cent mark will be subjected to a 0.5 per cent premium, the bank said.

Source : Business Times - 20 Sep 2006

MAYBANK is trying aggressively to build up its home loan market, with schemes that offer flexible repayment options, and cash rebates on fixed-rate mortgage packages.

Its Choice Instalment Scheme allows clients to adjust home loan instalments at between 0.1 per cent and 1 per cent of the property value for the first five years.

In a conventional mortgage, buyers must stick to the instalment amount, which is based on the loan rate.

Maybank said the flexibility option recognises that some borrowers want to defer repayments, while others prefer to accelerate them in order to save on interest costs. It is believed to be the first bank here to offer such a package.

In the example of a $650,000 private property, monthly instalments could go as low as $650, or as high as the maximum of $6,500.

This allows a borrower to better match his income and repayments at different points during the initial five years.

It applies to both private and HDB properties and the first adjustment will be free. Subsequent variations cost $500 each.

About 40 per cent of Maybank’s home loan clients last year were new home buyers.

The head of its consumer banking unit here, Ms Helen Neo, said: ‘There is the peace of mind from knowing exactly what you need to pay each month regardless of moving interest rates.’

Another scheme offers a cashback of 3 per cent on three-year fixed rate home loans and 5 per cent on five-year fixed rate loans for completed properties.

On signing up for a three-year fixed-rate home loan of $800,000, for example, a customer would receive cash of $24,000.

Maybank said its scheme is the highest on offer here, where the average cashback is 1 per cent.

Source : Straits Times - 15 Sep 2006

It’s first bank here to extend such loans to older homeowners; other banks not keen to join race

Catering to the needs of Singapore’s ageing population, OCBC Bank has become the first bank here to offer reverse mortgage loans, joining pioneer, NTUC Income, which has been offering such loans for several years. A reverse mortgage is a special type of loan homeowners can take against their home, which enables them to convert their home-equity into cash.

Other banks here have no immediate plans to offer reverse mortgages - and some bankers think there is not much demand for the product.

Tan Chia Seng, Citibank Singapore’s business director for secured assets group, said: ‘As our existing suite of mortgage offerings meets the needs of our customers, we have no immediate plans to introduce reverse mortgage packages.

‘The feedback from our regular conversations with customers, either directly or via market research, indicates that customers who may have a need to unlock the cash value of their properties usually prefer to do so by downsizing to smaller properties.’

Koh Kar Siong, managing director of secured loans at DBS Bank, said: ‘We have been monitoring the development and business opportunity closely. There are currently more popular alternatives available to the older homeowners who require cash.’

Mr Koh said older homeowners can, among other things, consider taking out mortgage term loans, downgrading their property, sub-letting or renting.

Kevin Lam, head of the loans division at United Overseas Bank, said: ‘We will monitor the demand for reverse mortgages.’

NTUC Income, which introduced a reverse mortgage scheme for private properties in January 1997, has about 350 reverse mortgage policy-holders for private properties. In March, following the government’s announcement to allow HDB flat owners to obtain reverse mortgages, NTUC Income started to offer such mortgages for HDB flats. And so far it has approved 10 such mortgages for HDB flat owners.

Melissa Yam, senior manager at NTUC Income, said: ‘Reverse mortgages allow our customers to continue to stay in their homes, enjoy capital appreciation on their property and help them cover day-to-day expenses.’

OCBC’s scheme is for private properties, and there are term-based and annuity-linked options.

For the term-based option, customers receive a monthly payout for up to 25 years or when they reach 90 years of age, whichever is earlier. The bank has the right to sell the property at the earlier of the end of the term of the loan or when a customer reaches 90.

Those concerned about outliving the payouts can choose the annuity-linked option, under which monthly payouts continue until death.

The term-based and annuity-linked options are priced at annual interest rates of 5 per cent and 4.88 per cent respectively. These rates are not guaranteed and can change over time, depending on how interest rates here move.

Taking the maximum financing quantum of 70 per cent on a property valued at $500,000 and free of encumbrances, the monthly payout is $823 for a 20-year loan. Using the same example, the monthly payout is $670 during the first 10 years and $557 subsequently under the annuity option.

‘We recognise that with longer life expectancy, many senior citizens are concerned about the rising cost of living and reduced income streams during retirement,’ said Gregory Chan, head of consumer secured lending at OCBC, who sees reverse mortgage loans providing an additional option for senior citizens.

‘We don’t see a big influx into reverse mortgages,’ he said. However, he believes the time is right to launch the reverse mortgage product because there is now greater awareness of retirement planning. Mr Chan thinks reverse mortgage loans can be useful for Singaporeans who are asset rich but cash poor. To be eligible for a reverse mortgage loan from OCBC, applicants must be Singapore citizens or permanent residents, aged 65 years and above and must own or co-own a private property with a remaining lease of at least 45 years at the end of the loan tenure.

Customers who might want to change their mind about reverse-mortgaging their property can unwind the arrangement by repaying the bank in full the money received from the reverse mortgage. A penalty fee of $500 is payable should this happen in the first five years of the reverse mortgage.

Source : Business Times - 28 Aug 2006

Lenders taking cautious approach to interest rates

Despite the recent upswing in the property market, owner-occupiers - rather than investors - continue to account for the bulk of new home loan applications here, according to major mortgage lenders.

Owner-occupiers account for 80 per cent of the new home loans granted by market leader DBS Bank, said Koh Kar Siong, its managing director of secured loans.

He said that although foreigners and investors have been showing more interest in the property market, the proportion of owner-occupiers among DBS’s new home loan customers has remained constant.

At least one other major player in the home loan market shares a similar view. ‘While we note an increasing trend among home loan applicants purchasing properties for investment … such cases are not broad-based and are generally skewed towards good class bungalows and luxury condominiums in prime locations,’ said Gregory Chan, OCBC Bank’s head of consumer secured lending.

But Mr Koh of DBS pointed out that there is typically a lag between a surge in new property sales and fresh loan applications, since developers require only a relatively small downpayment for a buyer to secure a property while it is still under construction. Much of the recent interest has centred on high-end properties that are still two or three years from completion, he noted.

DBS saw a dip in the size of its Singapore home loans book earlier this year as customers - spooked by rising interest rates - paid down their mortgages after receiving their annual bonuses in the first quarter. But Mr Koh said the bank has maintained its market share of about 25 per cent and he expects this to stay roughly the same. The bank enjoyed 40 per cent growth in new mortgage loans in the second quarter compared with the first quarter, he said.

Asked if DBS - which has raised its mortgage rates just once this year - will increase them again soon, he said that it is tracking competitors’ moves and ‘we are reviewing the situation carefully’.

Explaining why home loan rates have been on the rise, the head of United Overseas Bank’s loans division, Kevin Lam, said the average three-month interbank rate rose 1.76 percentage points between January 2005 and June 2006. ‘In this environment of rising lending costs, our loan rates have been adjusted to reflect rational pricing and commercial viability,’ he said. The three-month interbank rate is now 3.56 per cent.

Other market players are also keeping a close watch to see how fast and by how much home loan rates will continue to move up this year. Many of the smaller players seem to be engaged in a game of wait-and-see.

‘It is quite possible the industry may see another round of rate increases soon,’ Citibank Singapore’s secured assets group business director Tan Chia Seng warned last week.

A spokeswoman for HSBC told BT: ‘While we have no immediate plans for a rate increase, we will continue to monitor the market closely.’

Standard Chartered Bank’s consumer banking head Ajay Kanwal said only that ‘the bank has been pricing interest rates in line with the market’.

A Maybank spokeswoman said: ‘As it is, interest rates are still moving up and we do not rule out revising the rates on our walk-in packages.’

OCBC’s Mr Chan did not rule out further hikes either. ‘Any future rate increases will depend on the competitive environment and our assessment of the interest rate trends,’ he said.

As competition in the home loans market intensifies, banks are coming up with increasingly innovative ways to attract new customers. In March, Stanchart launched a home mortgage scheme that allows borrowers to link their home loans with up to 10 deposit accounts belonging to family members, each earning interest at a full percentage point above the prevailing savings rate.

Last December, DBS launched its Managed Mortgage product, which combines both fixed and floating rate loans in a single mortgage. Mr Koh told BT that more than 60 per cent of new home loan applications to the bank since then have been for the product, which allows customers to mix and match up to four different loan packages from a range of 11 choices, comprising a floating rate package and fixed rate packages with tenures from one to 10 years.

Other industry players have balked at introducing home loans with fixed rates of more than five years, saying that few borrowers go for such loans.

Indeed, just one per cent of applicants for the product choose a fixed rate package of five years or more as part of their bundled mortgage, according to Mr Koh, although he insists the bank does have customers who choose its 10-year fixed rate package.

Source : Business Times - 9 Aug 2006

Higher interest rates the main reason, say banks

A YEAR after the Government relaxed rules on lending to let private home buyers borrow up to 90 per cent of the property’s value, only 10 per cent to 20 per cent of all home loan applicants have taken up the full loan quantum.

A check by The Straits Times with seven banks found that the number of home buyers opting for 90 per cent financing packages has not been increasing, even though the property market has been recovering over the last year.

In fact, some banks even say they have seen a fall in take-up rates.

The main reason for this is the higher interest rates charged for these larger loans, say the banks, which together account for the bulk of the home loan market here.

The new rules on property lending were introduced last July to increase the loan quantum from the previous 80 per cent ceiling, which was imposed in 1996 to cool the property market.

Now, property buyers need only pay a down payment of 10 per cent, half of which can come from Central Provident Fund monies.

In the year since, the new rules appear to have benefited mostly new home buyers such as young couples, the banks say.

There has been no drop in demand for the banks’ other home loan packages, suggesting that the 90 per cent financing allows new home buyers - who would otherwise not have been able to afford the down payment on a home - to enter the market.

While there are no publicly-available figures for the number of home loan applicants each year, a rough estimate is the number of homes sold. According to the Urban Redevelopment Authority’s latest figures, about 19,450 homes have been sold in the 12 months ending June 30 this year.

A DBS spokesman said that the percentage of the bank’s customers taking 90 per cent financing ‘remains unchanged’ at an average take-up rate of 20 per cent.

This proportion stands at 15 per cent for HSBC, between 10 per cent and 20 per cent for Standard Chartered Bank, and at 5 per cent for Maybank.

United Overseas Bank would say only that its figures are in line with the market trend, while OCBC Bank declined to reveal any figures.

At Citibank, its business director for secured assets,

Mr Tan Chia Seng, said that while more than a fifth of its home loan applicants opted for 90 per cent financing initially, this has since fallen to less than 10 per cent.

Market watchers say the seemingly low take-up rates are not surprising.

Mr Lui Seng Fatt, regional director at Jones Lang LaSalle, said that 10 to 20 per cent is ‘a reasonable number’.

‘The 90 per cent financing probably only affects some of the borderline cases who need help with their down payments,’ he said. ‘It cannot turn people who have no intention of buying a house at all into home buyers.’

The Monetary Authority of Singapore’s (MAS’) latest financial stability review, which covered data until last December, showed that the proportion of new mortgages with a loan-to-value (LTV) ratio of more than 80 per cent fell from 19.6 per cent last October, to 15.3 per cent in December.

The review also suggested that the rate of take-up of these loans ‘could have been slowed by higher mortgage rates charged by banks’.

A 90 per cent financing package typically costs a mortgage-holder around one percentage point more in interest payments.

Rough estimates from market players have shown that for a private home costing around $400,000, a 90 per cent loan could cost $400 more in repayments each month compared to an 80 per cent loan.

MAS’ figures showed that more than four out of five home buyers who opted for mortgages with LTV ratios of above 80 per cent were owner-occupiers rather than investors, suggesting that the new rules have had little impact on property speculation.

Indeed the banks confirmed that most of their clients taking up 90 per cent financing are younger couples buying homes for their own use.

‘Younger couples or first-time aspiring entrants into the market have gotten in more easily and are forming an increasingly larger pool of younger home owners,’ said Citibank’s Mr Tan.

The change to property financing rules was part of a package of measures introduced last July, which many in the market had expected to raise home sales and demand.

MORE YOUNGER BUYERS

‘Younger couples or first-time aspiring entrants into the market have gotten in more easily and are forming an increasingly larger pool of younger home owners.’MR TAN, from Citibank, on the type of clients who take up 90 per cent financing

BORDERLINE CASES

‘The 90 per cent financing probably only affects some of the borderline cases who need help with their down payments.

It cannot turn people who have no intention of buying a house at all into home buyers.’MR LUI, from Jones Lang LaSalle, on the take-up rate being reasonable

Source : Straits Times - 1 Aug 2006