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23-06-2011, 07:57 AM
My take: if property buyers do not do their homework properly, it's their fault right? Since almost everyone on the island (and quite a few people I know personally) is diving into property, I'd assume everyone is cognizant of the risks!
Business Times - 23 Jun 2011
Standard bank fact sheet for home loans proposed
Consumers should be warned of higher repayments if interest rates rise: MAS
By conRAD TAN
(SINGAPORE) Banks and other financial institutions marketing home loans to consumers will have to provide them with a fact sheet warning how their loan repayments could rise if interest rates go up, under proposals by the Monetary Authority of Singapore (MAS).
The fact sheet - to be presented in a standard format by all lenders - will also describe other essential features of the loan, including estimates of the monthly repayment amounts and whether the lender has the right to make further changes to the interest rate charged during the tenure of the loan.
'A residential property loan is a long-term financial commitment. The current low global interest rate environment will not continue indefinitely. The fact sheet is intended to help consumers understand that higher interest rates could have severe implications if they overextend themselves,' MAS said yesterday.
Representatives of mortgage lenders would be expected to provide the fact sheet as soon as they start loan discussions with a potential customer, regardless of who initiates the discussion, 'so that the consumer can make an informed decision on whether to commit to the property purchase and take up the loan', MAS said in a consultation paper published on its website.
The fact sheet would also point potential borrowers to a consumer guide on home loans produced by national financial education programme MoneySENSE and the Association of Banks in Singapore (ABS).
The proposals would apply to all MAS-regulated financial institutions that offer loans for the purchase of residential properties in Singapore, MAS said. It is seeking public feedback on the proposals until July 22.
'This is a good initiative which will further enhance transparency and consistency in providing pertinent information to customers for residential property loans,' said Helen Neo, head of consumer banking at Maybank Singapore.
'As an industry measure, it will promote customer education at a faster pace with common terminology and similar presentation of information being applied across all financial institutions,' she added.
A spokesman at DBS Group said that the bank already offers potential customers a fact sheet that highlights 'most of the information suggested in the consultation paper', adding that customers who are offered a home loan also have up to seven days to review the loan offer before committing to it.
'Having a standardised fact sheet will make it easier for customers to compare offers from different financial institutions,' the spokesman said.
Chia Siew Cheng, head of the loans division at United Overseas Bank (UOB), said that the bank already provides loan details such as 'the principal and interest repayment amount on the applicable interest rate packages, the repayment penalties, lock-in period, as well as the fees and charges' when discussing home loans with customers.
'A housing loan is a long-term commitment, and affordability is a key factor in buyers' decisions,' Ms Chia added. 'Hence, it is useful to understand the monthly loan repayments based on different interest rate scenarios. Future interest rate increases will drive up monthly instalments and could result in financial hardship.'
She added: 'We encourage customers to set aside sufficient funds to meet rising interest rates and any unforeseen circumstances. In addition, if the property is meant for investment, and rental income is used for loan servicing, they should also factor in a possible drop in rental rates.'
Business Times - 23 Jun 2011
Standard bank fact sheet for home loans proposed
Consumers should be warned of higher repayments if interest rates rise: MAS
By conRAD TAN
(SINGAPORE) Banks and other financial institutions marketing home loans to consumers will have to provide them with a fact sheet warning how their loan repayments could rise if interest rates go up, under proposals by the Monetary Authority of Singapore (MAS).
The fact sheet - to be presented in a standard format by all lenders - will also describe other essential features of the loan, including estimates of the monthly repayment amounts and whether the lender has the right to make further changes to the interest rate charged during the tenure of the loan.
'A residential property loan is a long-term financial commitment. The current low global interest rate environment will not continue indefinitely. The fact sheet is intended to help consumers understand that higher interest rates could have severe implications if they overextend themselves,' MAS said yesterday.
Representatives of mortgage lenders would be expected to provide the fact sheet as soon as they start loan discussions with a potential customer, regardless of who initiates the discussion, 'so that the consumer can make an informed decision on whether to commit to the property purchase and take up the loan', MAS said in a consultation paper published on its website.
The fact sheet would also point potential borrowers to a consumer guide on home loans produced by national financial education programme MoneySENSE and the Association of Banks in Singapore (ABS).
The proposals would apply to all MAS-regulated financial institutions that offer loans for the purchase of residential properties in Singapore, MAS said. It is seeking public feedback on the proposals until July 22.
'This is a good initiative which will further enhance transparency and consistency in providing pertinent information to customers for residential property loans,' said Helen Neo, head of consumer banking at Maybank Singapore.
'As an industry measure, it will promote customer education at a faster pace with common terminology and similar presentation of information being applied across all financial institutions,' she added.
A spokesman at DBS Group said that the bank already offers potential customers a fact sheet that highlights 'most of the information suggested in the consultation paper', adding that customers who are offered a home loan also have up to seven days to review the loan offer before committing to it.
'Having a standardised fact sheet will make it easier for customers to compare offers from different financial institutions,' the spokesman said.
Chia Siew Cheng, head of the loans division at United Overseas Bank (UOB), said that the bank already provides loan details such as 'the principal and interest repayment amount on the applicable interest rate packages, the repayment penalties, lock-in period, as well as the fees and charges' when discussing home loans with customers.
'A housing loan is a long-term commitment, and affordability is a key factor in buyers' decisions,' Ms Chia added. 'Hence, it is useful to understand the monthly loan repayments based on different interest rate scenarios. Future interest rate increases will drive up monthly instalments and could result in financial hardship.'
She added: 'We encourage customers to set aside sufficient funds to meet rising interest rates and any unforeseen circumstances. In addition, if the property is meant for investment, and rental income is used for loan servicing, they should also factor in a possible drop in rental rates.'
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