Our
de facto English newspaper has reported today that DBS has introduced a product
offering to help protect home owners in case their mortgage instalments start
increasing.
The
DBS Interest Guard acts like an insurance policy for new and existing mortgages
that are pegged to the interbank rate, which will increase if global rates
rise.
The
product means a borrower can cap his interest rate for a set period no matter
what happens to rates in the open market.
It
will cost from $5 to $23 a month for every $100,000 of the loan, depending on
the form of protection.
Protection
can be bought for only two or three years. After that the borrower will have to
pay instalments at the new interest rate.
Customers
can choose when their protection kicks in.
One
option starts when the local interbank rate hits 1.5%. The more expensive
option is triggered when the interbank rate hits 1%, providing a lower interest
rate cap for the borrower.
So
is this a case of DBS being the opportunist or as per what the Chinese says: 无风不起浪 (translated
as: There’s no waves without wind)? Some of us will recognize the English equivalent as
Update:
And
in a separate report by our de facto Business newspaper today, the take-up rate
for DBS’s fixed rate packages has increased by more than 65% as a result of home
buyers’ fear of interest rate hikes.
While
rates are not expected to increase dramatically overnight, historical data has
shown that it is not inconceivable for Sibor to increase by a few percentage
points in a matter of months.
At the beginning of
the global financial crisis, on Sep 26, 2008, Sibor rose by 0.47% in a single
day. Over the last five years, Sibor has risen as high as 3.56% in July 2006
and reached a record low of 0.34% in September 2011.
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