POSB mortgage plan leads market: DBS

Aug 14, 2008
POSB mortgage plan leads market: DBS
It says half the buyers ineligible for HDB loans have Home Ideal
package
By Grace Ng

DBS BANK says it has reached a decisive milestone in its renewed
efforts to grab a bigger slice of the Singapore mass mortgage market
with its POSB brand.

It adds that it has pulled ahead of rival banks in offering loans to
HDB flat dwellers.

The bank says it has captured more than half of the market for loans
to Singaporeans who are not eligible to take up a Housing Board
concessionary loan.

The HDB currently provides loans for 60 per cent of flat resale
transactions, with banks in Singapore offering the remaining 40 per
cent. Of this latter group, one in two Singaporeans currently has a
POSB Home Ideal mortgage, which offers transparent interest rates.

In 2003, the HDB liberalised the market to allow Singapore banks to
serve this customer base. Two years later, there were a handful of
players battling neck and neck for customers, including Hong Leong
Finance, OCBC Bank and DBS.

In 2006, DBS started to pull ahead after launching its flagship POSB
Home Ideal product with interest rates pegged to the Central
Providend Fund (CPF) Ordinary Account rate.

This product offered the stability and transparency that appealed to
HDB homebuyers and helped POSB to notch up an all-time record of
sales during one month in the second quarter of this year, said Mr
Koh Kar Siong, DBS' head of consumer deposits and secured lending, in
an interview yesterday.

Over the past three years, POSB has seen a compounded annual growth
rate of 20 per cent in its HDB home-loans business.

And growth was still sizzling in the second quarter of this year.
POSB saw a 22 per cent rise in the number of new mortgage accounts in
this period, compared to the preceding three months. Meanwhile, loan
volumes grew by more than a third.

During this period, the total number ofresale transactions increased
22 per cent to hit 7,760, compared with the preceding three months.

DBS chief executive Richard Stanley has declared that POSB will be
relaunched. It will celebrate its long history by offering better
service and more products to Singaporeans, as part of his strategy to
aggressively grow the bank's Singapore and Hong Kong business.

With more than 70 per cent of people in Singapore living in an HDB
flat, the Housing Board mortgage market is - not surprisingly - high
on POSB's agenda for aggressive expansion.

Mr Koh acknowledged that loans growth is expected to moderate in the
coming months, as buyers and sellers of flats take a 'more prolonged
time' to negotiate and complete transactions.

But POSB will still be coming up with ways to enhance its Home Ideal
mortgage in order to attract 'even more significant market share', he
said.

The best price in the market is the current 2.6 per cent annual rate
for those who qualify for an HDB concessionary loan. This rate is
pegged at 0.1 per cent above the prevailing CPF interest rate.

But for those who need to take up a bank loan, the POSB Ideal
package's average annual interest rate over three years is 3.1 per
cent.

This is based on the first-year rate of the CPF rate plus 0.25 per
cent; the CPF rate plus 0.5 per cent in the second year; and the CPF
rate plus 1 per cent in the third.

This compares with 3.5 per cent for the variable-rate loans offered
by United Overseas Bank as well as OCBC, and an average of 3.18 per
cent over three years for a Hong Leong Finance variable-rate loan.