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
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.