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Tuesday, April 04, 2006
Banks charge differently from what they say
I refer to the letter from Very Kind Lady, “Why do existing customers pay a higher 2nd-year rate?” (ST March 31)
Very Kind Lady took a floating rate home-loan from United Overseas Bank (UOB). The loan is now in its second year and it costs 4.05 per cent. However, UOB’s advertised second year rate is only 3.5 per cent.
The 3 local banks offer identical home-loan rates and our family had a similar experience with a different bank. Our year 2 home loan rate shot up to 3.85 per cent while the quoted rate is also 3.5 per cent.
I looked into this and found there is no relation between the rates banks quote and the rates they charge. In fact, a loan officer told me, "The variable rates we tell customers does not obligate the bank in any way."
It turns out that how much you pay depends on the bank’s "board rate". Each bank has many board rates and can re-set them at any time. This determines how much a borrower must pay for a variable rate home-loan. It is independent of a bank’s advertised rates.
Larry Haverkamp
Tan Kin Lian at 9:50 PM
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Tan Kin Lian's Blog
E-mail: [email protected]. Website: www.tankinlian.com Facebook: www.facebook.com/kinlian
Tuesday, April 04, 2006
Banks charge differently from what they say
I refer to the letter from Very Kind Lady, “Why do existing customers pay a higher 2nd-year rate?” (ST March 31)
Very Kind Lady took a floating rate home-loan from United Overseas Bank (UOB). The loan is now in its second year and it costs 4.05 per cent. However, UOB’s advertised second year rate is only 3.5 per cent.
The 3 local banks offer identical home-loan rates and our family had a similar experience with a different bank. Our year 2 home loan rate shot up to 3.85 per cent while the quoted rate is also 3.5 per cent.
I looked into this and found there is no relation between the rates banks quote and the rates they charge. In fact, a loan officer told me, "The variable rates we tell customers does not obligate the bank in any way."
It turns out that how much you pay depends on the bank’s "board rate". Each bank has many board rates and can re-set them at any time. This determines how much a borrower must pay for a variable rate home-loan. It is independent of a bank’s advertised rates.
Larry Haverkamp
Tan Kin Lian at 9:50 PM
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1 comment:
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onehappyreaderApril 20, 2006 5:42 PM
I am taking up home loan from Standard Chartered Bank since year 2004 & I am not happy with the increased interest rate for the 2 yr. What they wrote on a contract is not being followed. They just mail me a letter on the 2nd yr informing me of their new increase board rate. I am very UNHAPPY.
It is the same with OCBC, POSB, UOB as well.
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