MANY home buyers with loans pegged to the Singapore Interbank Offered Rate (Sibor) have been hit with higher repayments following the Sibor's increase this year.
That is to be expected, but some Citibank customers have also found that the margin or spread - the added percentage banks tack on to the Sibor - has also moved up.
They were informed earlier this month that the spread on their Sibor-pegged loans would increase to 0.85 per cent from the promotional rate they had signed up with. The change takes effect from April 1.
Citibank said the spreads range from 0.6 to 0.8 per cent for customers who took up loans in late 2010 and in 2011.
One customer said he has been on a three-month Sibor loan since 2011 under a two-year lock-in package. His spread has risen from 0.7 per cent to 0.85 per cent.
However, Citibank said raising the spread has affected only a small number of people.
Mr Peng Chun Hsien, Citibank Singapore's head of secured finance solutions, also stressed that the "current revision is only applicable to clients outside the lock-in period".
Another customer, a Mr Lee, said he has been on a one-month Sibor home loan since 2011.
He told The Straits Times his spread has risen from 0.65 to 0.85 per cent but he had thought the spread would stay at 0.65 per cent throughout the loan.
Mr Peng told The Straits Times: "The word 'throughout' is a term the industry uses, and refers to the tenure and period that we are covering."
He added that affected customers had been given sufficient notice so that the process is transparent and they can opt to refinance their loans. Mr Peng noted that the overall rate is still fairly competitive.
Mr Keff Hui, a broker at Mortgage Supermart Singapore, noted that an 0.85 per cent spread used to be the market rate but some banks had lowered it to attract customers.
Another client on a one-month Sibor said: "Sibor is already variable and has gone up by 100 per cent year on year. How can the spread be variable too?"
Finance industry experts say reviewing spreads is standard bank practice, but in practice, changing the spread during the loan period is uncommon.
The Straits Times understands that banks such as United Overseas Bank and OCBC Bank have not increased the spreads. A DBS Bank spokesman said DBS and POSB have not varied spreads while under an existing agreement with customers. He said an 0.85 per cent spread used to be the market rate but some banks have lowered it to attract customers.
Customer Mr Lee said: "I will have to pay $200 to $300 more a month, but the amount is not significant. It's about how the bank can do this to customers."
Mr Seah Seng Choon, executive director of the Consumers Association of Singapore, said: "We are of the view that the banks should justify such rate changes clearly to the affected consumers. Such changes will not be fair to consumers if there is no justification to do so."
Citibank said it undertook "careful consideration of factors including prevailing market conditions" before making the move.
The Monetary Authority of Singapore (MAS) said it does not regulate the setting of interest rates but the banks must provide clear and relevant information on products and services, said a spokesman, adding that MAS has asked Citibank to review the customer feedback received.
Mr Peng said all the terms and conditions have been carefully outlined and that interest-rate definitions are clearly stated.
He encouraged affected customers to contact the bank, adding that any decision they make regarding their loans will not be bound by any penalty or fees.