Banks here seem to have shrugged off the government’s announcement on Monday that the interest absorption scheme (IAS) will be banned with immediate effect, but analysts are less sanguine.
Lower home sales and the resulting slowdown in housing loans growth could hit the three local banks’ profits, analysts said. There could also be a ripple effect in the form of a drop-off in loans made to developers and builders.
Banks told BT that the government’s decision to disallow the IAS and the similar interest-only housing loans (IOL) with immediate effect will not hurt them too badly.
‘While the take-up rate for IAS is good, our normal progressive home loan packages are actually more attractive and popular with homebuyers,’ said United Overseas Bank’s (UOB) head of loans division Chia Siew Cheng. ‘These measures (the ban of IAS and IOL) are not likely to have a significant impact on the bank’s loan business as most customers have opted for the normal progressive loan scheme, which is more attractive.’
But Royal Bank of Scotland (RBS) analyst Trevor Kalcic expects the earnings of the three local banks to be reduced by around 0.5 per cent though a negative impact on both volumes and margins. Continue reading
Lush Dream Home 