Banks charge differently from what they say

I refer to the letter from Gan Siok Bin, “Why do existing customers pay a higher 2nd-year rate?” (ST March 31)

Gan Siok Bin took a floating rate home-loan from United Overseas Bank (UOB). The loan is now in its second year and it costs 4.05 per cent. However, UOB’s advertised second year rate is only 3.5 per cent.

The 3 local banks offer identical home-loan rates and our family had a similar experience with a different bank. Our year 2 home loan rate shot up to 3.85 per cent while the quoted rate is also 3.5 per cent.

I looked into this and found there is no relation between the rates banks quote and the rates they charge. In fact, a loan officer told me, "The variable rates we tell customers does not obligate the bank in any way."

It turns out that how much you pay depends on the bank’s "board rate". Each bank has many board rates and can re-set them at any time. This determines how much a borrower must pay for a variable rate home-loan. It is independent of a bank’s advertised rates.

Larry Haverkamp