Friday, July 27, 2012

MAS monitoring UOB's 50-year mortgage loan offer

Business Times: Thu, Jul 26

THE Monetary Authority of Singapore (MAS) is carefully monitoring a new 50-year mortgage product that was launched recently.

"We believe it is only one bank that is offering right now, and there has been no take-up," said MAS deputy managing director Teo Swee Lian at its annual report review.

United Overseas Bank recently introduced a home loan that spans half a century - probably the longest-term loan available here.

Asked if the MAS considers the long-tenor mortgage prudent, Ms Teo said: "MAS does watch carefully all the banks' credit underwriting standards and how they push credit products."

"Where necessary, we would take action," she added.

Some years ago, banks had pushed interest payment only mortgages and MAS came down against them because they were not prudent, she added. "Some may be perfectly reasonable and some may require some kind of tempering," she said.

UOB said it had developed the loan - applicable to private residential and HDB loans only - to help younger executives afford their first home.

"We expect applicants to be interested in this home loan option as it offers a smaller monthly loan instalment and is easier to manage when people are starting out in their careers," said Chia Siew Cheng, UOB's head of secured loans, Personal Financial Services.

"We are very clear with applicants that the longer repayment period and loan tenor also mean that more interest will be payable over the period of the loan," she added.

Ms Chia said that since the product was introduced this year, some young couples had applied for the 50-year loan, though the majority still tended to apply for loans with a tenor ranging from 20 to 35 years.

"Every customer is taken through a personal process whereby the principal amount and the interest payable over the loan tenor are explained to them. Customers can make comparisons of the various loan options before they make a decision. For all types of home loans that UOB offers, the bank carefully assesses each application using a range of criteria, including the loan-to-value ratio, the value of the property and the applicant's income," she said.

Also, the maximum loan tenor eligibility is dependent on the borrower's age - applicants cannot be more than 80 years of age at the end of the loan tenor.

If the property is leasehold, it needs to have at least 35 years left on the lease at the end of the 50-year loan.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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