Compare Singapore home loans | Singapore Housing Loans | Refinance Home loans | Mortgage Refinance Singapore

We have a slightly different approach to comparing home loan. It is important that you understand how each bank gets their funding so that you can compare not just the Singapore home loan packages, but what lies underneath.

How do the banks get their funding? Are some safer than others? Are local banks necessarily safer than the foreign banks?

Some claim that DBS, OCBC and UOB are safer for the borrowers because they do not raise rates so fast for their variable rate packages, because they have a lower cost of funds.

For some, safer means a perceived safety in terms of financial strength of the bank.

All banks in Singapore has to pass the stringent requirement set by the Monetary Authority of Singapore (MAS) and pass the capital adequacy ratio.

In terms of safety, Singapore’s banks regardless of local or foreign are quite solvent.

The rules and requirements for both the local and foreign banks are the same.

Ms Angelina Fernandez?Director (Communications)?Monetary Authority of?Singapore said on 26 Seo 2008 (My paper). “Our regulations also require foreign-bank branches in Singapore to maintain a proportion of the assets of their Singapore branch in safe and liquid Singapore dollar-denominated and Singapore-domiciled assets.”

In any case, depositors have first claim over assets of any banks in the case of a wind up. The funds required as a deposit by the banks will be used to compensate the savers first.

Are Local banks really safer?

Is it fair for banks to claim that they are safer from raising interest rates if buyers go with their variable rates home loan just because they are local?

Do local banks really have lower cost of lending and therefore will not raise home loan lending rates for variable rate loans as easily as other foreign banks?

First and foremost, banks will not tell you how much funding and what is their cost of funds as it is somewhat secret. But you can find some related information in their financial report if they are listed entities

So how would we know local banks won’t raise rates?

Secondly, there is no guarantee that lower cost translate into lower lending rates, of course higher cost will almost certainly translate into higher lending rates. If the prevailing lending rates have increased, what would stop the banks from raising rates to improve their margins?

The only guarantee is competition and a robust market.

Many foreign banks have now obtained the QFB status. QFB stands for Qualified Full Bank. This means that they can obtain deposits and operate a full range of banking services in Singapore. That makes them no different from local banks, perhaps with the main difference being of scale and number of branches. Many foreign banks already operate like local banks, staffed with locals.

Source of Funding advantage

Certain banks such as DBS may have a larger depositor base and larger sources of cheap funding given that many Singaporeans grew up with a POSB savings account.

Therefore in order to compare Singapore home loan, the safety and solvency of the bank is not of critical concern, unless there is a risk of them recalling your loan.

The best safety in our opinion is that home buyers, property buyers, property investors should exercise caution and not go into excessive leverage. If they are not in excessive leverage, even in the case where a loan is recalled by a bank that is going under, there will most likely be other banks willing to take over if your debt to asset ratio is low.

Therefore we emphasize that safety should start from the time you buy your property and structure your home loan financing. Praying for, a bank to be a SAFE bank should be a secondary concern.

Therefore when doing Singapore Home loan comparison, focus on a home loan meeting your personal requirements and cash flow needs and give yourself that safety net.

For Singapore home loan refinancing, it is the same case.

This principle applies to Singapore home loan and mortgage refinancing as well.

You cannot control how safe a bank will be, but you can control how safe you want to be.

Property Buyer Mortgage Consultants

6100-0608

9782-8606

loans@propertybuyer.com.sg