[SINGAPORE] The home loan market may be pretty dismal but that seems to have got the creative juices going at OCBC Bank. The bank has launched a video contest to offer the lowest home loan rates in town, though it's for August only.
Home sales have been languishing amid the tough financing rules rolled out since June last year. At OCBC, new home loan applications have fallen around 40 per cent year on year, said Lynnice Ng, OCBC spokeswoman. So, the name of the game is not to just sell loans to buyers of new homes but refinancing, that is, win over a customer from another bank and also entice those with a HDB loan.
Seizing on the nation's celebratory mood for the upcoming National Day party, OCBC is inviting customers to submit a video on what home means to them. Those who join will be offered a low interest rate of 0.49 for the first year which is fixed.
The year two and three rates are currently 1.49 per cent and 1.69 per cent, respectively, translating to an effective interest rate of 1.22 per cent for the first three years. The National Day special applies only to variable rate packages, which are based on its board rate that is currently 4.5 per cent.
And the top five winners will get an interest-free rate first year, or S$1,000 of grocery vouchers if they are not eligible for a home loan or if they are not interested in a home loan. To increase winning chances, participants can share the URL of their videos and get friends and family to "like" their submissions.
Said Phang Lah Hwa, OCBC's head of secured lending: "We are delighted to roll out a series of activities which celebrate the enduring values that we share as Singaporeans, values that have stood us in good stead in the past and give us confidence for an even brighter future."
She added: "As a bank, we want to help customers own a comfortable dream home or help with interest savings on their existing home loans. To celebrate Singapore's 49th National Day, we are availing the best home loan packages for the month of August."
OCBC's rivals have their own National Day promotions.
DBS is giving savers a National Day special. "We launched the POSB National Day promotion where customers can top up their savings accounts by S$1,000 to S$10,000 by the end of this month, said Lui Su Kian, DBS head of deposits and secured lending. "They can then enjoy an attractive interest rate of 1.5 per cent if they maintain their total top-up amounts till Nov 30. Within two short days of the launch of the promotion, we have seen more than 1,500 customers taking up the offer."
United Overseas Bank said that its best-selling home loan package carries an effective rate of 2 per cent over five years. Customers also have the flexibility to make partial repayments at no additional cost, said a UOB spokeswoman. "This is a key feature for a floating rate package which can mitigate customers' concern on rising cost of funds."
Observers say that borrowers should realise that variable packages which entice with "super honeymoon rates" may backfire when interest rates rise. And some are expecting that interest rates may rise earlier than expected since the rebound in the US economy has begun gaining momentum.
Increasingly popular are fixed rate home loans. DBS offers a fixed rate package of 2.18 per cent for five years, which was increased from 1.88 per cent from last November.
OCBC's latest video contest promotion is "not material" - more to raise its "noise" level rather than a serious effort to grab market share. "It's more marketing than market grabbing," said Anand Swaminathan, Credit Suisse analyst.
The banks will try to maintain their margins; they want to make some noise but not be too successful, he said. He noted that DBS quickly raised its popular five-year fixed rate deal to 2.18 per cent when the 1.88 per cent package sold well.