Published in the June 26, 2013 issue of The Brunei Times. Click here for original article
Home loan market settles
Potential home buyers who had held back on buying immediately
after the new rates were imposed are now back in the market. Picture: BT
file
Debbie Too and
Wednesday, June 26, 2013
THREE months after the central bank imposed changes in key interest rates, the residential loan market appears to have adjusted to a new normal.
Potential home buyers who had held back on buying immediately after the new rates were imposed are now back in the market, opting to proceed with long-planned purchases in the wake of the changes. Financial institutions, on their part, have factored the new rates into their products and are now back in business after a number imposed a short-lived moratorium on home financing.
"We are still going to go ahead and take up a home financing product," said Rina, a potential home owner who had earlier expressed concern over the impact of the changes in the interest rates on access to home financing.
She said that she and her husband were going to push through with the plan to get home financing since there was "no choice".
The Autoriti Monetari Brunei Darussalam (AMBD) on March 6 imposed new rates with the aim of enhancing the financial infrastructure and inculcating sound financial and debt management among users of credit.
Under the AMBD directive, residential property loans or financing now have a revised maximum effective interest rate or annualised profit rate of not more than 4.5 per cent per annum.
Following the amendment of interest rates, banks -- some of which froze home loans for around a week -- altered their packages to take into account the new interest rate regime.
Among others, banks decreased the amount they would finance for the property to 70 per cent -80 per cent of its value. Subsidies for home loan packages, which can amount to $15,000, were also cancelled.
Indirect impact
In an email interview, Dr Chua Yang Liang, the head of research for Southeast Asia for property consultant Jones Lang LaSalle, told The Brunei Times that the impact of interest rates on housing demand is "not as direct".
"Fundamentally, housing demand can be a consumption or for investment... In Brunei, as the housing market is still largely a domestic play, the rise or fall of interest rate may not change demand as quickly or as dramatically as you would expect," she said.
She also said that Brunei is a "relatively stable market" and added that while Bruneians might change their buying pattern in reaction to the shift in the interest rate, "we do not think that this alone is sufficient to lead to a structural shift to the residential market".
While overall the home financing market seems to be getting back on track, however, there could be changes in banks' share of the market as debtors flock to creditors with the most favourable packages.
Rasidah Haji Abu Bakar, a reporter for The Brunei Times and a home loan applicant, said that she is now opting to purchase property through Standard Chartered Bank (SCB) because the bank gives a longer repayment period compared to HSBC (B) Sdn Bhd, her previous choice.
"They (HSBC) changed their repayment period for home loans to 10 years and I can't afford to repay for a house in 10 years," she said.
She also said that SCB provided her with subsidies for the processing fees and other contractual agreements with the bank. Even with this, however, she is required to shell out more cash for her loans now since additional items such as the mortgage reducing term assurance -- an insurance cover in the event of the applicant's death or permanent disability -- would require a personal loan to pay off.
Cheok Fui Say, general manager of Retail Lending at SCB, said that demand for home loans has continued, but it was not clear if the increased demand was seen as a direct result of the rates revision.
She only said that "with the revised rates, customers are even more advantaged by the fact that all rates are equal and this would save them time from going from bank to bank to 'shop' for the best rates". She added, though, that the bank has seen a surge in applications for refinancing.
HSBC, on the other hand, said in reply to questions sent by The Brunei Times that volumes have gone down.
"(HSBC is) satisfied with the changes it has made on its home loan application, but obviously the volumes have reduced considerably over the past few months as a result of these changes."
HSBC's restructed home loan packages now have a repayment period that was shortened to 10 years, and the bank has told customers that it would only finance properties for up to a maximum of 70 per cent of their value. The bank has also taken away subsidies that used to amount to a maximum of $15,000 and included land valuation, insurance and others.
Other borrowers, meanwhile, opt to take up financing from banks that they have a history with. Rina, for instance, said that she and her husband would probably opt to go to Bank Islam Brunei Darussalam (BIBD) "because it's my husband's bank".
"We haven't met up with the home financing specialist to discuss what our package would be but we heard that financing would be up to 80 per cent only," she said.
A home financing specialist from BIBD said: "At the bank we would handle the financing option, and we offer financing up to 70 per cent of the market value or the selling price, whichever is lower."
She added that on a case-by-case basis the amount being financed could be increased.
Depending on the financial health of the customer, sometimes the subsidies can be included in the total amount for the home financing product, but if they are not eligible, customers may have to opt for a personal loan to pay for the subsidies. Baiduri Bank, for its part, says it has been doing well on the home financing front.
Pierre Imhof, the chief executive officer of Baiduri, said that the amendments to the interest rates did not have much of an impact to the bank's home financing packages as it had already been offering rates that were in line with the new rules prior to their effectivity.
Imhof added that the price that Baiduri grants under its facility is directly linked, or is in proportion, to the risk the bank has to take.
"What we have also seen is that there is a backlog to the access of ownership in Brunei and we definitely believe that a number of people are still keen to come and see us to find the right loan," he said. The Brunei Times
Wednesday, June 26, 2013
THREE months after the central bank imposed changes in key interest rates, the residential loan market appears to have adjusted to a new normal.
Potential home buyers who had held back on buying immediately after the new rates were imposed are now back in the market, opting to proceed with long-planned purchases in the wake of the changes. Financial institutions, on their part, have factored the new rates into their products and are now back in business after a number imposed a short-lived moratorium on home financing.
"We are still going to go ahead and take up a home financing product," said Rina, a potential home owner who had earlier expressed concern over the impact of the changes in the interest rates on access to home financing.
She said that she and her husband were going to push through with the plan to get home financing since there was "no choice".
The Autoriti Monetari Brunei Darussalam (AMBD) on March 6 imposed new rates with the aim of enhancing the financial infrastructure and inculcating sound financial and debt management among users of credit.
Under the AMBD directive, residential property loans or financing now have a revised maximum effective interest rate or annualised profit rate of not more than 4.5 per cent per annum.
Following the amendment of interest rates, banks -- some of which froze home loans for around a week -- altered their packages to take into account the new interest rate regime.
Among others, banks decreased the amount they would finance for the property to 70 per cent -80 per cent of its value. Subsidies for home loan packages, which can amount to $15,000, were also cancelled.
Indirect impact
In an email interview, Dr Chua Yang Liang, the head of research for Southeast Asia for property consultant Jones Lang LaSalle, told The Brunei Times that the impact of interest rates on housing demand is "not as direct".
"Fundamentally, housing demand can be a consumption or for investment... In Brunei, as the housing market is still largely a domestic play, the rise or fall of interest rate may not change demand as quickly or as dramatically as you would expect," she said.
She also said that Brunei is a "relatively stable market" and added that while Bruneians might change their buying pattern in reaction to the shift in the interest rate, "we do not think that this alone is sufficient to lead to a structural shift to the residential market".
While overall the home financing market seems to be getting back on track, however, there could be changes in banks' share of the market as debtors flock to creditors with the most favourable packages.
Rasidah Haji Abu Bakar, a reporter for The Brunei Times and a home loan applicant, said that she is now opting to purchase property through Standard Chartered Bank (SCB) because the bank gives a longer repayment period compared to HSBC (B) Sdn Bhd, her previous choice.
"They (HSBC) changed their repayment period for home loans to 10 years and I can't afford to repay for a house in 10 years," she said.
She also said that SCB provided her with subsidies for the processing fees and other contractual agreements with the bank. Even with this, however, she is required to shell out more cash for her loans now since additional items such as the mortgage reducing term assurance -- an insurance cover in the event of the applicant's death or permanent disability -- would require a personal loan to pay off.
Cheok Fui Say, general manager of Retail Lending at SCB, said that demand for home loans has continued, but it was not clear if the increased demand was seen as a direct result of the rates revision.
She only said that "with the revised rates, customers are even more advantaged by the fact that all rates are equal and this would save them time from going from bank to bank to 'shop' for the best rates". She added, though, that the bank has seen a surge in applications for refinancing.
HSBC, on the other hand, said in reply to questions sent by The Brunei Times that volumes have gone down.
"(HSBC is) satisfied with the changes it has made on its home loan application, but obviously the volumes have reduced considerably over the past few months as a result of these changes."
HSBC's restructed home loan packages now have a repayment period that was shortened to 10 years, and the bank has told customers that it would only finance properties for up to a maximum of 70 per cent of their value. The bank has also taken away subsidies that used to amount to a maximum of $15,000 and included land valuation, insurance and others.
Other borrowers, meanwhile, opt to take up financing from banks that they have a history with. Rina, for instance, said that she and her husband would probably opt to go to Bank Islam Brunei Darussalam (BIBD) "because it's my husband's bank".
"We haven't met up with the home financing specialist to discuss what our package would be but we heard that financing would be up to 80 per cent only," she said.
A home financing specialist from BIBD said: "At the bank we would handle the financing option, and we offer financing up to 70 per cent of the market value or the selling price, whichever is lower."
She added that on a case-by-case basis the amount being financed could be increased.
Depending on the financial health of the customer, sometimes the subsidies can be included in the total amount for the home financing product, but if they are not eligible, customers may have to opt for a personal loan to pay for the subsidies. Baiduri Bank, for its part, says it has been doing well on the home financing front.
Pierre Imhof, the chief executive officer of Baiduri, said that the amendments to the interest rates did not have much of an impact to the bank's home financing packages as it had already been offering rates that were in line with the new rules prior to their effectivity.
Imhof added that the price that Baiduri grants under its facility is directly linked, or is in proportion, to the risk the bank has to take.
"What we have also seen is that there is a backlog to the access of ownership in Brunei and we definitely believe that a number of people are still keen to come and see us to find the right loan," he said. The Brunei Times
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