www.shaproperty.com

(SINGAPORE) Despite the recent upswing in the property market, owner-occupiers - rather than investors - continue to account for the bulk of new home loan applications here, according to major mortgage lenders.

Keen competition: Banks are coming up with increasingly innovative ways to attract new customers

Owner-occupiers account for 80 per cent of the new home loans granted by market leader DBS Bank, said Koh Kar Siong, its managing director of secured loans.

He said that although foreigners and investors have been showing more interest in the property market, the proportion of owner-occupiers among DBS's new home loan customers has remained constant.

At least one other major player in the home loan market shares a similar view. 'While we note an increasing trend among home loan applicants purchasing properties for investment ... such cases are not broad-based and are generally skewed towards good class bungalows and luxury condominiums in prime locations,' said Gregory Chan, OCBC Bank's head of consumer secured lending.

But Mr Koh of DBS pointed out that there is typically a lag between a surge in new property sales and fresh loan applications, since developers require only a relatively small downpayment for a buyer to secure a property while it is still under construction. Much of the recent interest has centred on high-end properties that are still two or three years from completion, he noted.

DBS is tracking competitors' moves and "we are reviewing the situation carefully.' - Koh Kar Siong, managing director of secured loans at DBS Bank, on whether the bank will raise its mortgage rates again

DBS saw a dip in the size of its Singapore home loans book earlier this year as customers - spooked by rising interest rates - paid down their mortgages after receiving their annual bonuses in the first quarter. But Mr Koh said the bank has maintained its market share of about 25 per cent and he expects this to stay roughly the same. The bank enjoyed 40 per cent growth in new mortgage loans in the second quarter compared with the first quarter, he said.

Asked if DBS - which has raised its mortgage rates just once this year - will increase them again soon, he said that it is tracking competitors' moves and 'we are reviewing the situation carefully'.

Explaining why home loan rates have been on the rise, the head of United Overseas Bank's loans division, Kevin Lam, said the average three-month interbank rate rose 1.76 percentage points between January 2005 and June 2006. 'In this environment of rising lending costs, our loan rates have been adjusted to reflect rational pricing and commercial viability,' he said. The three-month interbank rate is now 3.56 per cent.

Other market players are also keeping a close watch to see how fast and by how much home loan rates will continue to move up this year. Many of the smaller players seem to be engaged in a game of wait-and-see.

'It is quite possible the industry may see another round of rate increases soon,' Citibank Singapore's secured assets group business director Tan Chia Seng warned last week.

A spokeswoman for HSBC told BT: 'While we have no immediate plans for a rate increase, we will continue to monitor the market closely.'

Standard Chartered Bank's consumer banking head Ajay Kanwal said only that 'the bank has been pricing interest rates in line with the market'.

A Maybank spokeswoman said: 'As it is, interest rates are still moving up and we do not rule out revising the rates on our walk-in packages.'

OCBC's Mr Chan did not rule out further hikes either. 'Any future rate increases will depend on the competitive environment and our assessment of the interest rate trends,' he said.

As competition in the home loans market intensifies, banks are coming up with increasingly innovative ways to attract new customers. In March, Stanchart launched a home mortgage scheme that allows borrowers to link their home loans with up to 10 deposit accounts belonging to family members, each earning interest at a full percentage point above the prevailing savings rate.

Last December, DBS launched its Managed Mortgage product, which combines both fixed and floating rate loans in a single mortgage. Mr Koh told BT that more than 60 per cent of new home loan applications to the bank since then have been for the product, which allows customers to mix and match up to four different loan packages from a range of 11 choices, comprising a floating rate package and fixed rate packages with tenures from one to 10 years.

Other industry players have balked at introducing home loans with fixed rates of more than five years, saying that few borrowers go for such loans.

Indeed, just one per cent of applicants for the product choose a fixed rate package of five years or more as part of their bundled mortgage, according to Mr Koh, although he insists the bank does have customers who choose its 10-year fixed rate package.