Affected customers band together against CIMB mortgage hike

CIMB Bank had planned to raise its Singapore inter-bank offered rate and swap offer rate in its floating rate packages.
CIMB Bank had planned to raise its Singapore inter-bank offered rate and swap offer rate in its floating rate packages.ST PHOTO: LIM YAOHUI

SINGAPORE - A group of 25 CIMB customers has come together to fight the bank's decision to raise mortgage rates for some of its packages amid the Covid-19 pandemic.

Group members have set up a website called HonestMortgages.sg to spread awareness, and written to the bank and relevant authorities.

But in seeking legal help, they find themselves stuck.

A spokesman for the group told The Straits Times last week: "Often, mortgage brokers and sometimes even lawyers are not able to help because they are afraid of offending the banks, so we have had to rely on our own resources."

A thorny issue that the group hopes to tackle is the banks' ability to raise interest rates at their discretion. The group is looking for more affected customers to rally to its cause.

"We want to ensure that banks do not have such unfair clauses in their mortgages. The first step will be to make sure that CIMB will honour its mortgage offer letter," the spokesman said.

CIMB Bank had planned to raise the floor rate of certain mortgages tied to the Singapore inter-bank offered rate (Sibor) and swap offer rate (SOR) to 0.9 per cent, from 0.1 per cent, on May 18.

But the bank pushed back its plan to Jan 1 next year after irate customers complained of its move, the Business Times reported last month.

CIMB declined to comment last week when ST asked for updates on the bank's planned mortgage hike.

Manager Lim Chee Wan, 42, said that he could pay 2.7 times more in interest on his mortgage when the proposed hike takes place next year.

"With Sibor at around 0.2 per cent on my mortgage of $913,000, I have to pay about $6,400 more in interest every year," he said.

 
 
 

"My loan just commenced in April. I'm locked in for three years (on) 30-year mortgage terms," he added.

A customer, who wanted to be known only as Ms Tham, said that her "additional interest burden comes up to almost $8,000 per annum or more than $600 a month" based on CIMB's revised Sibor floor rate and one-month Sibor at 0.25 per cent as of May 26.

"This is not a small sum, in the light of difficult economic conditions ahead," said Ms Tham, who is self-employed and in her 40s.

She added: "My loan has not been disbursed. Once drawn in June 2020, the two-year lock-in period will commence."

She pointed out that CIMB offered to waive penalty and administrative fees if she chose to refinance.

"But this is cold comfort, as refinancing is subject to credit underwriting and can be challenging for borrowers whose credit profiles are impacted by the Covid-19 pandemic. Also, there is opportunity cost in us switching out," she added.

The spokesman for the consumer group said that the group was formed at the end of April, when the bank first notified customers about the rate hike.

"All of us have been trying to engage the regulator to act decisively against CIMB as it sets a bad precedent for the industry," he said.

"(The central bank) has asked us to write directly to the bank, but we have not gotten any indication that the bank will rescind its decision," he added.

 
 
 

Education Minister Ong Ye Kung, who is on the board of the Monetary Authority of Singapore (MAS), told Parliament last week that the authority "expects housing loan interest rates to be revised downwards in a fair manner where this is consistent with sustained trends in banks' cost of funding for such loans" amid the relief measures rolled out during the pandemic.

The Consumers Association of Singapore said that it had received two complaints regarding the hike so far.

The MAS did not provide the number of complaints it had received on the proposed hike, but a spokesman said that the authority "has engaged CIMB on the basis for the increase in the floor rate of its Sibor/SOR-pegged mortgages".

"We understand that the bank has since delayed the effective date of the floor rate adjustment to Jan 1, 2021. This will allow affected customers ample time to consider alternatives should they choose to do so," he added.

Associate Professor Lawrence Loh from the National University of Singapore Business School said: "The legality of CIMB's move and the case for the affected customers are complex, given the need to carefully examine the terms in the contract and the offer letter, as well as other considerations like lock-in periods."

He added: "Notwithstanding the legal aspects, it is good to look at the matter from a business angle - this pandemic crisis is probably not the best time to induce hardships for customers.

"Goodwill and trust are critical elements - particularly now. A more accommodating gesture will go a long way to attract and retain customers, who will remember this even after the pandemic episode."