Sub-1% mortgages draw well-heeled borrowers

Promotional floating rate from Citi is for wealthy clients who take home loan of at least S$800,000; banks keen on loans with stable assets as interest rates plunge to record lows

Mon, Nov 09, 2020

Siow Li Sen

https://www.businesstimes.com.sg/ban...eled-borrowers

BUYING a private home just got cheaper with a promotional rate of sub-1 per cent offered by Citibank.

The market has been abuzz in recent weeks about an aggressive home loan promotion by the US bank, which is for affluent clients who take a home loan of at least S$800,000.

The promotional floating rate from Citi is just under 1 per cent. But the talk is that for the well-heeled buyers of landed properties, the home loan rate could fall even lower.

This compares with UOB's 1.35 per cent and 1.40 per cent for its fixed and floating home loan rates as of November 5.

At OCBC, it's 1.45 per cent for fixed, while floating rates start from 1.34 per cent.

Roy Phua, Citibank Singapore head of mortgage and Citibusiness, said property forms a significant and integral part of Singapore customers' wealth management portfolio.

"Property is an aspirational lifestyle as well as legacy asset for many," said Mr Phua.

"As part of our overall wealth management strategy to serve affluent customers in Singapore, we believe that mortgages will continue to be a key financing instrument to help clients realise their property ownership goals. From time to time, we offer special promotions for Citigold and Citigold Private Client customers," he said.

The current online only promotion is available for new and existing Citigold and Citigold Private Clients customers. Promotional rates range from just below 1 per cent for a floating loan based on the Singapore interbank offered rate (Sibor), to 1.15 per cent for fixed, with applicable conditions to qualify.

Citi is referencing the 1-month Sibor for floating rates, which is now at 0.25 per cent. The promotion is valid for both landed and non-landed properties, and is available for just a month. It started on Oct 21, and is due to end on Nov 20.

Citigold customers must have minimum investible assets of S$250,000. For the Citigold Private Client segment, that minimum in investible assets stands at S$1.5 million.

It's unlikely other banks will rush to offer sub-1 per cent rates.

UOB does not offer home loans with interest rates below 1 per cent, said Jacquelyn Tan, UOB head of group personal financial services.

"We encourage home buyers to have a long-term view when choosing their home loan package as home ownership is a long-term commitment," said Ms Tan.

"Customers should be aware of the costs and the terms of their home loan. They should also set aside sufficient funds to manage unforeseen circumstances and when interest rates rise."

The current interest rate environment, while low, remains uncertain. As such, many homeowners prefer the bank's fixed-rate home loan packages, she said.

"A fixed monthly repayment amount over a certain period within the loan tenor enables our customers to have peace of mind and better control over how they manage their finances," she said.

Phang Lah Hwa, OCBC head of consumer secured lending said with home loans, it is best to take a holistic view and consider the overall package beyond interest rates.

"Other key terms worth considering include the prepayment penalties, cancellation fees, fees and charges, as well as the service provided. Mortgage rules can be complex, which is why consumers should speak to a mortgage specialist, she said.

A DBS spokesperson said the bank's mortgage packages remain "competitive". "Rates for wealth customers are often assessed based on their overall banking relationship with us."

The pandemic has driven interest rates to record lows and banks are keen to sell loans collateralised with stable assets. Home loans are typically among the lowest risk and home sales have been robust through this economic crisis.

The key 3-month Sibor (Singapore interbank offered rate), typically used to price home loans on floating rates, was 0.40229 per cent on Nov 5, slumping from 1.7745 per cent at the start of 2020.

Consumer loans in September climbed 0.3 per cent to S$256.18 billion month on month, lifted by housing loans and share financing.

Housing loans, which make up about three quarters of consumer lending, inched into positive territory for the first time since January, up 0.1 per cent month on month to S$199.09 billion in September.

The Urban Redevelopment Authority's flash estimate for the third quarter of this year showed that the overall price index for private homes in Singapore edged up 0.8 per cent over the preceding three months. Despite the Covid-19 crisis, the price index is expected to end the year in positive territory.

Alfred Chia, chief executive of financial advisory firm SingCapital said that generally "the bigger the loan size, the more banks are willing to offer a better rate".

"Citi is very aggressive... it's just to attract the kind of customers they want," he said.

As for the even lower rates for landed homes, Mr Chia said values of landed homes are seen as very secure and stable because foreigners are not in the picture, so there is less speculative activity.

Only Singapore citizens can buy landed homes with no restrictions.