Several mortgage brokers in Singapore have received orders from two banks to stop providing home loans pegged to Swap Offer Rates (SORs), according to The Business Times.
In addition, another bank has added a new clause into offer letters providing a floor rate for the SOR in its mortgages.
All these took place after the SORs turned negative. The three-month SOR hit a new low yesterday, falling from -0.0119 to -0.6987. The six-month SOR also dropped further from -0.06622 to -0.99258.
The SOR signifies the synthetic cost of borrowing Singapore dollars, by borrowing US dollars at similar maturity and exchanging them for Singapore dollars.
Some mortgage brokers said they received word from DBS Group and Maybank to stop providing SOR packages from the banks, with immediate effect.
Without confirming this allegation, a spokesman from DBS commented, “SOR-pegged loans are not part of our standard offerings. In view of their inherent volatility and the long-term nature of mortgage loans, such products are deemed unsuitable for retail customers who buy residential property for owner occupation.”
“As such, they form a very small part of our portfolio and are usually offered upon customer’s request. Our terms and conditions do allow the bank to introduce a minimum or floor rate for such benchmarks.”
On the other hand, Helen Neo, Head of Consumer Banking at Maybank Singapore noted, “We currently do not offer SOR-pegged loans.”
In April 2011, Maybank launched a new product called the ceiling-rate home loan, which is pegged to the three-month SOR.
It was launched along with another package called the hybrid-rate home loan, which is pegged to either a fixed rate in different years or the Sibor.
Neo noted that the hybrid-rate home loan is now the bank’s most popular loan.
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