Update on 7 June 2020 - Comments on CIMB New Fixed Rate Offer

• Several of us have received CIMB's new fixed-rate offers. Customers are now offered the opportunity to choose between (a) 0.9% fixed rate for 2 years or (b) 1.1% fixed rate for 3 years. This offer is only valid for 14 days after receipt of the email from CIMB.

• Individuals should decide on whether to switch based on their own preferences and circumstances.

• We have noticed CIMB has added new clauses in the MAS fact sheet which allow them to make changes after the lock-in (fixed) period - see image below. The new clauses are as follows:

  

  After the lock-up period, the bank can vary the spread or type of reference rate under the following circumstances:

  1. The market conditions (where credit availability and funding needs are affected) or your status has changed significantly requiring the FI to vary the terms in order to continue maintaining your loan.
  2. In the event that it is no longer feasible for your FI to continue funding your property loan at the existing interest rate for the remaining loan tenure due to a significant increase in your FI’s funding cost and/or decrease in Reference Rate.

Are Changes Post Lock-In Period Fair?

• Such clauses after the lock-in period are common for several banks (not just CIMB). The rationale is that banks need to manage their risks. However, it is not clear to us that this is well-communicated to consumers, or that consumers are aware of the risks.
• We know of incidents where bankers provide comfort by saying it is rare for banks to change the spread of their loans after the lock-in period — this sort of marketing likely results in consumers being complacent about this change.
• Consumers need to be aware that for their mortgages, the post lock-in period ("day after") rate will not necessarily apply for the entire tenure of the mortgage. Individuals who face a risk in refinancing, such as retirees and those at risk of losing their jobs, should plan their personal finances appropriately.

Reminder

• CIMB still hasn't indicated that they will not attempt to increase the floor rate again.

Update on 4 June 2020 - CIMB's U-Turn

• CIMB has apologised and announced that they will scrap their planned increase of the minimum SIBOR/SOR rate ("floor rate") - see coverage in Straits Times, Business Times, Today Online.
• We understand that all affected individuals are eligible for a two-year fixed rate package of 0.9 per cent or a three-year fixed rate loan package of 1.1 per cent. We have been told verbally that this is for a limited period only and responses have to be given in 14 days.
• We caution all customers that the original Terms and Conditions which CIMB relied on to raise the floor rate are still in place.

Our response

We have released the following statement to the media.

We accept CIMB's apology. Homeownership is not possible without fair and honest mortgages. We look forward to CIMB reviewing their terms and conditions to ensure their mortgages are indeed honest. Our website HonestMortgages.sg will remain accessible as a learning point for consumers going forward.

Unanswered Questions

While CIMB has reverted to the original floor rate, there remain several unanswered questions:

• Was it illegal for CIMB to unilaterally increase the floor rate?