More enquiries on bank loans for Malaysian properties

In view of the closer bilateral ties between Malaysia and Singapore, more and more Singaporeans are interested in property investment across the Causeway. As a result, both local and Malaysian banks have seen an increase in enquiries pertaining to home purchases in Malaysia.

According to a representative from Malaysian bank CIMB, the bank is led to deduce that demand for Malaysian properties is high from the positive market interest in Malaysian property loans.  Since the launch of the Iskandar project, they have received many enquiries from mainly Singaporeans. Based on a 3-month Singapore Interbank Offer rate (Sibor), CIMB offers loans in Singdollars with an interest rate at about 3.3%.

The Sibor is the interest rate that banks charge each other and serves as a benchmark for interest rates in Singapore.

Similarly, Maybank offers a package that also pegs interest rates to the three-month Sibor. The Maybank loan spreads over the first 2 years at 2.5% which then rises to 3% from the third year onwards, resulting in an average loan rate of 2.9%.  

Both Maybank and CIMB offer a loan-to-value (LTV) ratio of up to 70% of a property’s valuation while UOB and OCBC offer mortgages with an LTV ratio of up to 80%, but in Malaysian ringgit. Interest rates have always been low in Singapore so investors who take out loans in Singdollars are generally in a more favourable position to benefit from the exchange rate savings.

Ms Coreen Kwan, the Head of retail banking at CIMB said that the bank’s products allow their clients to pay loan installments directly from Singapore, which saves them the trouble of opening a Malaysian bank account. As one Singaporean investor Ms Rachel Ng shared, she bought a property in Puteri Harbour for RM$1.6 million and took a 70% loan from OCBC Malaysia, only to be able to place maximum cash deposit of RM$10, 000 upon opening a deposit account with the bank. Subsequent loan installments have to be done via telegraphic transfers with unfavourable exchange rates that are not comparable to the money changers’.

According to OCBC Malaysia, the bank offers home loans in ringgit-denomination with interest rates between 4.1% and 4.3% per annum.