Home Loan Review: May Bank’s Three Years Fixed Package

By: Zeng Han Jun, CPCG, Singapore

May Bank’s latest home loan package come as good news to real estate investors amid the gloomy financial market. With most of the banks tuning up on the interest rates for fixed home loan packages, May Bank actually went south with their latest home loan package.

With interest rates for three consecutive years being: 1st Year), 1.6% 2nd Year), 2.2% 3rd Year) 2.9%, the numbers are even lower than some of the other banks’ floating interest rated home loans. The surprising thing is that the interest rates are fixed. Market turmoil has caused rates cutting measures around the globe and inter bank lending rates for Singapore too has reached extremely low levels. For the past few months, the 3 months Sibor rate has maintained itself below 0.8%. Although inter bank lending rates have been dwelling in the trough of the interest rate cycle, banks have instead offered home loan packages that are fixed at significantly higher rates. Clearly the banks are cautious about pricing their home loans at a lower rate because of uncertainty of how the interest rates might move in the future. Which was why May Bank’s new package comes as a good news at the moment.

One big drawback that local real estate investors and owners might find from this home loan package is that it is pegged to an internal board rate. According to a research survey that I have done last year, real estate investors and owners alike favor home loans that are pegged to rates like Sibor and SOR. With the home loan offered by May Bank being pegged to an internal board rate, consumers might find that there is a lack of transparency in the determination of the rate.

This point is offset by the fact that it is structured fixed for three years, therefore making movement of the internal board rate an irrelevant issue. However, the internal board rate is an issue to deal with when the loan goes out of lock in period.

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