Finance companies had the lowest interest rates at the start of the year, but three months on, banks have also started dropping prices.
Competition is stiff among major local banks and financiers, but DBS Bank, OCBC Bank and United Overseas Bank (UOB) have been going on the offensive with not just lower prices but additional services as well.
SIAS Research lead analyst Moh Tse Yang said: "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're looking at the banks aggressively chasing the home loans."
At the end of last year, Hong Leong Finance was offering some of the lowest rates, with first year interest rate for its public housing loan at 1.3 per cent. But within three months, the banks responded.
As at the end of last month, DBS' variable public housing home loan rate for the first year stood at 1.3 per cent, while OCBC's rates came in at 1.26 per cent.
Hong Leong's current rates have also come down, standing at 1.23 per cent. UOB declined to give their rates for the period.
But despite the rapid lowering of rates, observers expect banks and financiers to stop short of a price war.
Ms Christine Kuo, senior analyst (financial institutions group) at 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."
Lenders are currently in the process of revising their home loan interest rates for this month, analysts said.
The expectation is that rates will be revised upwards, in light of strong continued demand from home buyers as well as on the back of outlook that interest rates may be on the uptrend going forward.
- TODAY, 7 April 2010
