SINGAPORE, June 4 — CIMB bank said that it would keep to its mortgage floor rate, after an earlier decision to increase it to 0.9 per cent from 0.1 per cent set off alarm among homeowners who have taken up loans with the bank.
In a statement yesterday, the bank said that it would be maintaining its floor rate at 0.1 per cent for certain mortgages tied to the Singapore inter-bank offered rate (Sibor) and swap offer rate (SOR).
Victor Lee, chief executive officer of CIMB Singapore, said: “We factored in that the market’s cost of deposits has fallen, hence allowing us to lower our deposit rates and cost of deposits so that we can maintain our floor rate at 0.1 per cent.
“We thank our customers for their feedback, and we sincerely apologise for the inconvenience caused.”
A group of more than 100 CIMB customers had set up a website to express their anger that the bank had planned in April to raise the floor rates of mortgages on May 18, which the bank then revised to Jan 1 next year.
“Nobody would expect — in the middle of a pandemic as interest rates began to fall — CIMB would suddenly inform all their customers that the floor rate would now be 0.9 per cent rather than 0.1 per cent,” the website stated.
There was “no justification” for this increase, it added.
TODAY spoke to three customers in the group who had each received a letter from CIMB stating the rate increase. They said that their attempts to ask the bank for the reasons behind the hike were unsuccessful.
‘The main issue is principle’
The beleaguered customers — who had found each other through social media and communicated on a Telegram chat — took issue with a clause in the bank’s standard terms and conditions, which allows the bank to change interest rates at its discretion and at any time.
One customer, a business owner who wants to be known only as Singh, said that this is “just fundamentally wrong”.
The 57-year-old has already paid off most of his S$300,000 (RM914,156.27) loan for his cluster house, and is more concerned about how the bank will treat other customers in future.
“The main issue is the principle (behind the hike),” he said.
Another customer, who wants to be known only as Dr Ong, said that he had just secured a S$750,000 housing loan for his executive condominium in March before he received a letter late in April on the hike. He was expecting to pay “two to three times” more interest if the floor rates were to increase as planned.
The 30-year-old, who is a doctor helping out in foreign worker dormitories, is upset that he has to deal with this issue while having to work on the frontlines.
“All of us are doing our part (during the pandemic) but it feels like the bank did not honour its contract It’s quite unreasonable,” he said.
In announcing its U-turn, CIMB also said that it would be offering its customers either a two-year fixed rate of 0.9 per cent or a three-year fixed rate of 1.10 per cent. This would be to “mitigate the fluctuations of the current volatile interest rates environment”.
“This will give our customers peace of mind for the next three years, allowing them to plan their finances accordingly for the immediate three years,” Lee from CIMB added.
“We are offering the lowest fixed rates for our existing customers on the Sibor and SOR packages as of today.”
What other banks say
Of the Singapore and international banks that TODAY approached, United Overseas Bank, DBS and Standard Chartered Bank Singapore have said that they have no plans to raise their mortgage floor rates.
OCBC said that its mortgage contracts do not specify a minimum interest rate, and that for SOR — and Sibor-pegged loans, the minimum value for the reference rate is 0 per cent should the market rate fall below that margin.
Associate Professor Lawrence Loh from the National University of Singapore Business School said that banks are likely to hold back any plans to hike rates during the Covid-19 crisis, when “the rest of Singapore is trying to alleviate hardships for other people”.
“Even if things are done legally, we would want to be compassionate.”
Agreeing, Alan Cheong, head of research at property firm Savills Singapore, said: “You don’t know the outcome (the economic situation) may go back to normal very fast and then (the hike) would be for nothing but bad publicity.”
In response to TODAY’s queries, the Monetary Authority of Singapore said: “We note that CIMB has listened carefully to its customers’ feedback and chosen to maintain the floor rate for its mortgages.” — TODAY