Lifting of caps on home financing can lead to healthy competition

, National 2 minutes, 10 seconds


BANKS said the lifting of caps on interest and profit rates for residential property can lead to healthy competition.

The Brunei Times talked to representatives of banks and asked about plans to update their home financing products in light of the decision of the Autoriti Monetari Brunei Darussalam (AMBD) to rescind an order that capped interest and profit rates for residential property. None of the banks talked about raising interest rates.

In the same vein, local real estate firms said the rates deregulation on residential property loans will provide potential buyers with more attractive financing packages, leading to an increased demand in property in the near future.

Property developers and businesses interviewed by The Brunei Times yesterday were optimistic that the decision by AMBD to revoke its control on profit rate will create a competitive property market. (Read more on A15)

Lim Yu Kwang, Maybank’s country head and general manager of Brunei operations, said the bank does not foresee any changes to its current offers on property financing. He said he expects that the recent move could encourage other players to rethink their strategy.

“Some banks in Brunei that have completely stopped offering property loans or are offering shorter property loan tenor may reconsider their strategy going forward,” he told The Brunei Times.

Home financing customers would benefit from a wider selection of banks offering property financing, he said.

“The outlook on the property market should remain stable,” he said.

HSBC Brunei issued an official statement welcoming the recent announcement by the AMBD.

It said lifting the cap on rates for property financing creates the opportunity for healthy competition and market growth in the home loan arena.

BIBD also said lifting the cap does not necessarily mean banks will price their rates to their liking.

“Market forces will ensure that banks exercise their pricing into a segment that is affordable for everyone with enough flexibility to create financing products that best suit individual needs,” said the bank in a statement.

“Furthermore, banks do not only compete on prices but also on other matters such as the provision of the overall banking experience, approval times and others, ultimately creating an overall banking package that benefits our customers,” said BIBD.

Rates for home property financing were previously capped at 4.5 per cent per annum. In March 2013, the AMBD had said that the measures on financing aimed to promote financial and debt management among borrowers. It said it will closely monitor lending in the property sector and “reserves the right to intervene from time to time to ensure a healthy competitive market”.

The Brunei Times