Thursday, October 05, 2006
[RealEdge] TodayOnline Forum : First 'discounts', then, spiralling rates
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| First 'discounts', then, spiralling rates Housing loan rate increased four times within a year MAS must stop or regulate practice of multiple rates Thursday ? October 5, 2006 Letter from Angeline Lee Letter from Deepak Gurnani With reference to Mr Seow Chee Bin's letter, "A loan in whose interest?" (Oct 4), I've had a similar experience. I signed a housing loan package conversion with a bank last year. The interest rate for the first year as stated in the contract was 4.35 per cent below the bank's prevailing floating board rate (FBR) from time to time, which was 6.25 per cent. Then, the resultant interest rate was only 1.9 per cent. However, I enjoyed the low interest rate for the first month only. Subsequently, the interest rate was increased to 2.15 per cent the following month, 2.55 per cent from the fifth month, 3.30 per cent from the eighth month and 3.8 per cent on the last month of the year. The interest rate had increased to twice the initial rate of 1.9 per cent. The FBR was increased four times, with an average increase of 0.5 percentage points every three months. I called the bank to check on the ever-rising FBR. I was told that the bank's FBR was currently 5.5 per cent and it only applied to new customers and that different FBRs applied to existing customers. Why there are different prevailing FBRs for different customers and on what basis? This was not stated in the contract. For the record, the conversion fee cost me $250. As a victim of multiple board rates for banks housing loans (or should I say, my "personalised board rate"), I could not agree more with the writer. However, what amazes me is the silence on the part of the regulatory authorities and the Consumers Association of Singapore. All the more surprising given the fact that Singapore is trying to position itself as financial capital of the region. A few months ago, I was shocked to learn about a bank's practice of having as many as six board rates for housing loans. Since no bank issued contrary statements, I assume many ? if not all ? banks practise this to some extent or the other. I strongly feel there should be total transparency whereby every customer is advised upfront of the number of multiple floating board rates by the bank and its impact on their loan. Often, the customer is lured by the huge discount offered at the initial stages of the loan pegged to prevailing board rate, unaware that this is not the only board rate ? and that there may be multiple board rates that can spiral up at the bank's sole discretion, very quickly, and often in no co-relation to the market trends. Ideally, I think the Monetary Authority of Singapore (MAS) should put a stop or, at the very least, regulate this practice of multiple board rates in the interest of homeowners and Singapore's reputation of having a transparent economy. | |
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// posted by Shajahan @ 8:25 AM 