Big lenders in Singapore are lowering their interest rates to beat off competition from each other and smaller financial institutions in a sizzling home loans market.
Financiers had some of the lowest interest rates at the start of the year, but three months on, many banks have also started dropping prices.
The Singapore property market is booming, helping to propel the home loans space.
Competition is intense among major banks and financiers in the country, but UOB, OCBC and DBS have gone on the offensive approach, not just lowering interest rates but with additional services as well.
Moh Tze Yang, lead analyst of SIAS Research, said that “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 end-2009, Hong Leong Finance was offering the lowest rates, with a 1.3 percent interest rate on the first year of its public housing loan. But within three months, many banks had fought back.
As of end-March this year, OCBC’s interest rates came in at 1.26 percent, while variable public housing home loan rates of DBS for the first year was set at 1.3 percent. Hong Leong’s current rates have also trimmed down at 1.23 percent.
Although interest rates are declining at a faster pace, many observers expect banks and financiers to stop short of a price war.
Christine Kuo, senior analyst of 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."
Interest rates are expected to be revised upwards, in light of strong continued homebuyers’ interest that many observers said is not likely to fade away any time soon.