Monday, April 1, 2013

DBS launches first-of-its-kind HDB home loan

The Business Times  |  APRIL 01, 2013
It caps new loan's interest below HDB concessionary rate for 10 years

[SINGAPORE] DBS Bank is going all out to grab a bigger slice of the HDB home loan market; it's offering a first-of-its-kind HDB home loan with guaranteed savings to home buyers for 10 years.

And critically, that means borrowers will be able to build up their CPF savings while enjoying the highest interest rates in the country in the meantime.

The Central Provident Fund (CPF) Ordinary Account rate, which has a minimum legislated rate of 2.50 per cent, is multiples higher than the banks' measly savings rate of 0.11 per cent.

From today, HDB home buyers can get a floating-rate loan with interest capped below the HDB concessionary rate for 10 years, DBS said.

Called the POSB HDB Loan, it charges for the first 10 years the 3-month Sibor (Singapore interbank offered rate) plus 1.38 per cent, capped at the CPF Ordinary Account rate. The current CPF Ordinary Account rate is 2.50 per cent.

Thereafter, the loan charges 3-month Sibor plus 1.48 per cent.

The existing 3-month Sibor is 0.38 per cent.

The HDB concessionary loan now charges 2.60 per cent which is made up of 0.10 per cent plus the CPF Ordinary Account rate of 2.50 per cent.

Based on the 3-month Sibor of 0.38 per cent, borrowers who switch from the HDB concessionary loan will pay a lower interest rate of 1.76 per cent.

And should interest rates rise over the next 10 years, the bank guarantees that it will be capped at the CPF Ordinary Account rate of 2.50 per cent or 0.10 per cent below the HDB concessionary rate.

The savings for a $320,000 loan with 30-year tenor is $49,082, based on the difference between the 2.60 per cent and the 1.76 per cent rates, said DBS.

And if $49,082 is left with the CPF for 30 years which pays 2.50 per cent interest, the interest earned will amount to $36,812, said DBS.

On an outstanding HDB loan of $150,000 and 10-year tenor, the saving is $6,809, it said. The interest earned on $6,809 for 10 years at 2.50 per cent will be $1,702.

As most borrowers use their CPF savings to pay the mortgage instalments, switching to the bank's loan means more savings are left in the CPF account to enjoy the princely rate of 2.50 per cent, said Lui Su Kian, DBS Bank head of deposits and secured lending.

All HDB home buyers are eligible for the POSB HDB Loan which also throws in a cash rebate of $1,800 to help with legal and valuation fees.

Last year, two-thirds of the 59,000 HDB home buyers took a loan from the HDB paying the 2.60 per cent concessionary rate, and it is this group that DBS hopes to attract.

Ms Lui said: "Mortgage is a long-term financial commitment and there is a certain level of inertia once a homebuyer settles on the loan."

It is important for HDB home buyers to consider loan options outside of the HDB concessionary loan during their purchase process as paying more for the HDB concessionary loan will "wipe out your CPF balances", she said.

DBS has the highest HDB loan market share at 30 per cent of new loans, the bank said.
Also, 60 per cent of HDB owners who refinance to bank loans chose DBS.

DBS's HDB loan portfolio is almost $10 billion, or about up 25 per cent of the bank's Singapore mortgage book, Ms Lui said.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C

Senior Sales Director
DTZ Property Network Pte Ltd (L3007960A)

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