01 February 2007

Singapore's Cockiest Bank Officer? (1)

I am still servicing my housing loan with an established foreign bank. Previously, this bank used to have a very attractive way of calculating my loan interest. It worked this way - I deposit my excess savings in a 'check-and-save' account. The monthly balance that I maintain in the account will be deducted from the loan principal before the monthly loan interest is calculated. For example, if I have a $300,000 housing loan and I have $240,000 savings in my account, I effectively pay loan interest only on $60,000, i.e. $300,000 - $240,000.

However, everything changed in October last year. The bank introduced a 'novel' (read profitable) way of calculating loan interest. With immediate effect, only 2/3 of my savings could be used to offset the loan principal for the purpose of calculating the loan interest. For the balance of 1/3 of the savings, the bank pays only a measly 1% interest which they claim 'is still higher than what most banks are paying'. Some consolation.

Many of the bank's customers, including yours truly, were caught unaware. Because of the recent property boom, some had signed up for a housing loan with the bank only a few months ago. Within that period, the interest rate, being a floating one, had been revised upwards a few times. As for me, I restructured my loan with the bank in early 2006. I had to pay more than $500 in administrative charges then. Immediately after the restructuring, I was enjoying a low loan interest rate of 1.6% p.a., but not for long. Now, only one year later, I am paying a hefty 4.55% p.a., almost a 3-fold increase.

To add insult to injury, the bank slapped us with the new way of calculating loan interest which was obviously aimed at squeezing even more money out of us. I have calculated - I am now effectively paying almost 6 times more interest compared to what I was paying early last year. Let's rework the sums using the same example above. With the new method of calculation, I can only offset 2/3 of my $240,000 savings or $180,000 from the loan principal of $300,000. This means that I have to pay interest on $120,000 instead of $60,000 previously, a two-fold increase. Coupled with the nearly 3-fold increase in interest rate, I am paying almost 6 times the original interest amount. This is simply ridiculous!

A few letters of complaint written by irate bank customers were published in the forum pages of our mainstream newspaper in October 2006. The bank replied, explaining that because of the rising interest rate environment, it had to raise interest rate for housing loans. It also refused to budge regarding its new way of calculating loan interest. It even tried to convince us that customers 'do not end up paying more interest than before'. What crap! Does the bank think that all of us failed our Primary School Maths?

Because of the above developments, I was at the Tampines Branch of the bank last Saturday to find out if would be worthwhile for me to redeem part of my loan using CPF funds. (CPF is paying me only 2.5% interest while the bank is charging me 4.55%. However, I have to pay 1.5% in penalty charges since my loan is still within the 2-year lock-in period.) As if to rub more salt into the wound, the 'Relationship Manager' who served me gave me extremely poor service despite the fact that I am a 'Priority Banking' customer.

(To be continued)

17 comments:

Anonymous said...

Hi Victor,
I think your blog is very interesting!! I was researching on old buildings in Singapore and I read all your 6 or 7 nostalgic posts back in 2005. I'm sure Chris, whoever he may be, has to agree that yours is a very good blog. - Dawn

Victor said...

Thanks Dawn for visiting my blog and your encouraging comment. Chris is my good friend and colleague. He was the one who challenged me to start this blog in May 2005.

If you are into nostalgic posts, you should visit Chun See's goodmorningyesterday, that is if you don't know about it yet. Chun See's blog is almost completely about Singapore's yesteryears whereas I blog about everything under the sun.

eastcoastlife said...

Oops, my apology to Mr Lam for carrying the teasing too far, I shouldn't have been kurang ajar and followed Victor to call you a policeman. I respect your principles. I apologise.


btw, the priest is not you. hehehe........

Victor said...

喂,你不要害我。自己闯祸不要连累别人。

Not everyone can stand your nonsense, okay.

eastcoastlife said...

hahahaha.... 要死一起死, 拉你陪葬!

etel said...

hahhaha... GD tell me which bank it is ok.. i make sure i dun go there for my banking :)

Victor said...

ECL - Choy, 要过年了,不要讲不吉利的话哦.

GNE - Aiyah, you not observant one. Open your eyes big big.

Chris said...

Victor - why so calculative one you. So rich some more. But I tell you, StandChart service used to be really good. But now, it sucks. Imagine they charge you for queueing in line to pay your bills. They prefer you to use internet or pay via the ATM. The ah pek ah poh dunno English one how ah? I boycotted the bank long ago already. Cancelled my credit card. Actually, all the banks service here the same one. Suck big time.

Lam Chun See said...

Sorry guys. Those who know me well always tell me I am too sensitive. 小气鬼 is exact word.

Victor said...

Chris - Who says that it must be the bank that you mentioned? I am not telling. Notice that I didn't mention the name of the bank but it was you who did. Be very afraid - you may get sued for mentioning the bank's name.

(Especially to GNE.) Actually if you read the newspapers and are familiar with the banking terms I mentioned here (which are unique to that bank), you will know which bank I am talking about. Aiyah, if you still didn't get it, there is a clue in the title of this post lah.

Chun See - Great to see you around here again. You sensitive? Orh... not I say wan hor. Haha.

No lah, I think sometimes we are also at fault because we don't know where the limit is regarding other people's principles and sensitivites and hence we push the envelope too far. (This para is NOT directed at ECL. 此地无银三百两. Haha.)

But hor, sometimes can loosen up a bit and let your hair down lah.
(Although I know that most of them are already down... and out, haha.)

Oh BTW, can the ladies and gentlemen here keep the discussion to banks? Thank you. (Oops, joking only, okay?)

fr said...

I also have account with the bank, (the sailing boat symbol one, right?)but not as much money as you.

Victor said...

No lah Frannxis, it is not the 'Chinese Junk' bank. That example is just for illustration purpose only. Actually, I don't have $240,000 in the bank... I have more, haha.

etel said...

hehe... i knwo which one already.. my sis used to work there for 3 yrs.. now working at citibank XD

eastcoastlife said...

Waaahhhhh! 'Priority Banking' customer. Must need a lot of cash in the deposit account, right? siao siao, cash monkey!

How come I dun know got such type of loans ah? aiya, the customer relations officers must think I'm ah soh dun know such thing wan la. heng arh, if not kena like you, hopping mad.

偷鸡不着, 蚀把米。

Victor said...

Jayne - Don't ask me why but the loan amount is counted for someone to qualify as a PB customer. That is to say, if you owe more than $200,000 to the bank, you qualify. Yes it looks absurd but it is understandable that if you are in big debt (especially when you have the ability to pay back but only slowly) then the bank wants you very badly.

Definition of 'bank' - Someone who lends you an umbrella in fine weather but takes it away when it rains.

Professional share investors will put most of their cash into shares. They do not believe in placing good money into savings or fixed deposit accounts to earn that miserly few percent interest, am I right? It's too slow a money-making process for the high risk takers who have strong hearts and healthy bank balances.

eastcoastlife said...

Did I just pissed you off ... again? hahaha........

Victor said...

Jayne - 我没那么小气。