New borrowers with HSBC’s variable rate home loans are to be allowed to defer their repayments for a month each year

New borrowers with HSBC’s variable rate home loans are to be allowed to defer their repayments for a month each year, six months after taking out a loan.

The bank, which announced the new ‘payment holiday’ feature this week, said each deferred monthly instalment will be added to the outstanding balance on the loan, which means customers who choose to defer a payment will need to pay higher subsequent monthly instalments.

Wendy Lim, the bank’s head of consumer banking in Singapore, said the option of a payment holiday would give customers greater flexibility in managing their finances.

A customer can take a one-month payment holiday for each anniversary year of the loan, but the first deferment can be made only after six months. The monthly instalments will be revised after each payment holiday.

The bank has also launched new home loan packages directly linked to the three-month Singapore interbank offered rate or Sibor, a common benchmark for banks’ loans to businesses here.

Interest rates charged on these home loan packages will be the published three-month Sibor on the first business day of each month, plus 0.7 of a percentage point, a bank spokesman said. In recent months, other banks here have also introduced mortgages based on publicly available benchmark rates.

Source : Business Times - 23 Aug 2007