The property cooling measures adopted in Jan 2013 had led to a drop in the number of property transactions, will banks start raising the housing loan rates to boost their earnings? 
 
Recently, most of the banks have increased the car loan rates by 43% from 1.88% to 2.68%. The move by banks could be mainly due to an expected substantial drop in interest earnings from car loan as a result of the Feb 2013 curbs on car loan limit and loan tenor. 

POSB is offering HDB flat buyers housing loan interest rate that is pegged to CPF Ordinary Account Rate. It is currently the only bank offering home loan package with interest rate cap for as long as 10 years.

How does it work?

Under the POSB package, borrowers will pay housing loan interest rate at 1.38% above the 3 month SIBOR for the first 10 years and thereafter at 1.48% above 3 month SIBOR. For the first 10 years, POSB has set a cap on the interest rate at CPF Ordinary Account Rate of 2.5%, which means borrowers will not be paying more than 2.5% in interest even if SIBOR goes up.

The latest measures by MAS could be seen as ways to control consumer spending on big ticket items, like properties and cars. The Jan 2013 property cooling measures reduces the loan limits substantially for second and more properties purchases. And last week measure is to cap the car loan limit at up to 60%, down from 100% previously, whilst the loan tenor is halved to 5 years. MAS has limited purchase of properties and cars to those who have the ability to pay for the upfront payment and at the same time reduce the risks of over borrowing.