Two Singapore banks have been offering home loan rates for as low as 0.2 percent on selected properties.
Some analysts said the moves by the two banks – United Overseas Bank (UOB) and DBS Bank – reflect intensifying competition in the mortgage market to maintain high loan volume amid uncertainty.
According to a Straits Times report, the two banks offered mortgage rates set at two commonly used benchmark interest rates, which are the Singapore interbank lending rate (Sibor) and swap offer rate (SOR).
The three-month Singapore dollar Sibor has hit a record low of 0.438 percent since January, while the three-month SOR has moved between 0.189 percent and 0.3 percent since April. It now stands at 0.21 percent.
The new record low interest rates are usually imposed for a promotional period like the first year, after a higher rate is applied.
Compare a SOR plus zero package that increases to SOR +1 percent after three years and a flat SOR +0.7 percent package to a S$1 million 30-year loan.
Vinod Nair, Chief Executive of website Smartloans.sg, said a borrower paid a total interest of S$5,430 for the first three years under the first package compared with S$25,557 for the same package. However, the borrower would actually pay less using the second package for a 30-year loan tenure.
Dr Chua Hak Bin, economist at Bank of America-Merrill Lynch, said the latest trend could be due to the lower mortgage applications and the “intensified competition among banks to maintain mortgage loan volumes.”
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