DBS Interest Guard

7/27/2019 DBS Interest Guard

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Whats New at DBS / POSB

DBS LAUNCHES INTEREST GUARD TO HELPHOMEOWNERS MANAGE RISING INTEREST RATES

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DBS Bank today introduced a first-of-its kind mortgage offering to protect homeownersagainst rising interest rates. DBS Interest Guard is an add-on to existing mortgages and caps the 3-month Singapore Interbank Offered Rate (SIBOR) at 1% for the next three years.

With this offering, homeowners can enjoy peace of mind, knowing that they are protectedagainst sudden increases in interest rates. DBS Interest Guard will benefit homeowners who may becommitted to an existing mortgage programme and those for whom refinancing may not be feasiblegiven recent regulation changes.

Lui Su Kian, Managing Director and Head of Deposits and Secured Lending at DBS Bank,said, The best time to lock into a set of good rates is during a low interest environment, especially forlonger term loans such as mortgages. We recognise that many homeowners may find it challenging todo so due to a variety of reasons, hence the DBS Interest Guard is designed to add a layer ofprotection against rising interest rates. With the majority of our customers purchasing homes to live ininstead of as investment, this offering addresses their need for security in a fluctuating interest rateenvironment.

In Singapore, property remains a key asset for many residents and represents one of thelongest term financial commitments for a household. The uncertainty in the macro environment since2008 has not stopped the growth of the property market. Instead, the low interest rate has fueledinterest in the market and contributed to the rise in property prices.

While the government and banks have taken steps to ensure that homebuyers are spendingwithin their means, housing loans in Singapore have grown at a much faster pace than earnings. Overthe last five years, the median gross monthly income for full time employed residents grew at anaverage of 4%. In contrast, housing and bridging loans have doubled over the last five years to SGD152 billion at the end of 2012, or an increase of 16% year-on-year on average.


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Over the last three months, the take up for DBS fixed rate programmes has increased bymore 65% as homebuyers in Singapore sought to take advantage of the low interest rate environment.

Presently, over 70% of the banks customers purchase their homes for owner occupation

purposes. With the average loan tenure spanning 20 years, it is prudent for homebuyers to considertheir repayment ability at different life stages. For instance, a young couples financial commitmentswould be significantly different when they have children. Assuming the couple is paying 1.5% interestper annum on their $500,000 mortgage, a single percentage point increase in SIBOR could mean a$237 increase in their monthly repayments. If the couple had subscribed to DBS Interest Guard, theincrease on their monthly repayments would only be $147, allowing them to set aside more money forother financial goals such as their childs education or retirement.

While rates are not expected to increase dramatically overnight, historical data has shownthat 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 26 September 2008, SIBOR increased by 0.47% in asingle day. Over the last five years, SIBOR has risen as high as 3.56% in July 2006 and reached arecord low of 0.34% in September 2011.

With DBS Interest Guard, homeowners can better protect themselves against rising rates fora nominal increase in their monthly repayments. There is no commitment period required for the DBSInterest Guard and homebuyers can opt to have interest rate caps of either 1% or 1.5% for the 3-month SIBOR over a protection period of two to three years. The monthly cost for adding on theprotection starts as low as $5 per month for every $100,000 loan outstanding.

The DBS Interest Guard is also available for new DBS mortgage customers. Customers cancontact the bank directly at +65 6333 0033 to determine if the DBS Interest Guard is suitable for them.

For more information on DBS suite of flexible mortgage programmes, please see Appendix A.

Protection period 2 Years 3 Years

Protection level for 3month SIBOR of 1% (per$100,000 loanoutstanding)

$10/month $23/month

Protection level for 3month SIBOR of 1.5%(per $100,000 loanoutstanding)

$5/month $18/month


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Appendix A: DBS suite of flexible mortgage programmes

Today, besides fixed and floating rates programmes, DBS carries a variety of hybrid offerings thatcombine both fixed and floating rates. These are designed to cater to customers who seek bothflexibility and security in knowing that their interest rate is capped:

POSB HDB Loan is the first floating rate programme in Singapore to provide HDB homebuyers withthe security of having interest capped below HDB concessionary rates for 10 years while benefitingfrom the current low interest rates.

Pegged to the 3-month SIBOR, the Mortgage Rate Protector allows customers to benefit from thecurrent low interest while remaining protected by a cap on the interest rate, in the event that interestrates go up.

DBS 2+2, the first-of-its-kind in Singapore, is a fixed rate programme suitable for customers whoprefer more stability in their repayments. DBS 2+2 allows customer to move on to floating rates aftertwo years if interest rates go down or exercise the option to enjoy the same fixed rates for another twoyears.


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Package with

MyProtector

MortgageYear 1 Year 2 Year 3 Year 4 Year 5

onwardsPOSB HDB

Loan 3M SIBOR +1.38%capped at theCPF Ordinary

Account rate

for the first 10

years

3M SIBOR +

1.38%

capped at theCPF Ordinary

Account rate

for the first 10

years

3M SIBOR +

1.38%


Account rate

for the first 10

years

3M SIBOR +

1.38%


Account rate

for the first 10

years

3M SIBOR +

1.38% capped

at the CPFOrdinary

Account rate

for the first 10

yearsMortgage Rate

Protector 3M SIBOR +1.15%capped at

1.88% for the

first 3 years

3M SIBOR +

1.15%

capped at

1.88% for the

first 3 years

3M SIBOR +

1.15%

capped at

1.88% for the

first 3 years

3M SIBOR +

1.25% 3M SIBOR +1.25%

DBS 2+2 1.78% FIXED 1.78% FIXED 1.78% FIXEDor 3M SIBOR+ 1.25%

1.78% FIXED

or 3M SIBOR+ 1.25% (if

taken up in

Year 3)

3M SIBOR +

1.25%

DBS Interest Guard

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