Banks, insurers compete for piece of mortgage pie

COMB through any newspaper these days and chances are you will most certainly stumble upon advertisements on property loans touting attractive terms and conditions.

It’s a highly competitive landscape out there.

Apart from competing among themselves for a piece of the mortgage pie, banks also have to contend with insurance companies which offer pretty appealing terms as well.

OCBC Bank (M) Bhd head of secured lending Thoo Mee Ling sees competition as a way of life in the property loans business.

“Intense competition, especially in pricing, has almost become the nature of the mortgage business.

“However, OCBC’s strategy has always been to keep close tabs on customers’ needs and not only meet but exceed their expectations as well as by going the extra mile,” Thoo says.

Currently, the discount on base lending rates for housing loans range from 1.8% to 2.2% in the market. Thoo says property loans will continue to have a significant influence on the bank’s net profit.

Despite the intense competition, HSBC Bank Malaysia Bhd general manager (personal financial services) Lim Eng Seong says the bank is comfortable with the size of its property loans book.

Lim believes HSBC’s strong product and service proposition via a flexible mortgage will be a key differentiating factor to grow the business further.

“Our flexible loan allows customers to make extra payments to reduce interest payments and shorten the loan tenure. Should an urgent need arise, customers may redraw the excess payments made,” he says.

HSBC offers home loans for a minimum of five years to a maximum of 35 years where margin of financing can go up to 95% of the property’s market value.

To ING Insurance Bhd chief operating officer Isold Heemstra, residential property mortgage is a way to diversify investment income for insurance companies.

“It helps to mitigate market volatility and provides a stable income stream to insurance companies that demand long-term cashflows,” he says.

However, ING’s mortgage portfolio shrank last year as borrowers went for floating rate products due to the lower overnight policy rate. Insurance companies offer fixed-rate residential mortgages.

Heemstra admits that competition in the property loans business has always been intense.

“We differentiate ourselves by providing a mortgage business total solution that comes with fixed-rate home loan with house owner and life insurance protection.

“ING also provides protection to the valuables and contents in one’s household against loss or damage on selective perils,” he says.

ING provides financing for residential properties only with a maximum loan amount of 90% and up to 30 years loan tenure.

ING now offers a fixed interest rate of 4.85% per annum (customer pays all closing fees) and 5.25% per annum (ING pays all closing fees).

American International Assurance Bhd (AIA) chief executive officer Khor Hock Seng says the company has experienced positive loans growth since 2005 although last year was challenging.

Its property loans portfolio are mostly made up of fixed-rate residential mortgages with margin of financing of below 80%.

Khor says the company will continue to work with its agency force and business channels to grow the property loans business. “We will also offer various packages to meet the needs of our clients,” he says.

AIA’s residential mortgages has a fixed rate of 4.99% per annum (non-zero moving cost) and 5.25% per annum for zero moving cost. The margin of financing is up to 90% for a maximum tenure of 30 years.

By The Star