AUB offers rate shield to homebuyers

Rebisco-led Asia United Bank (AUB) is protecting home loan borrowers from the steep rise in interest rates after the COVID-19 global pandemic ushered in a prolonged period of low interest rates.

Reginald Neil Garcia, assistant vice president and team leader for Home Loans at AUB, said borrowers must still brace for the sudden upsurge once the economy recovers.

The listed bank is offering Home Rate Protect (HRP) as borrowers must not sit comfortably as rates will not scrape rock bottom forever.

“Our primary objective is to offer our clients a sense of security and free them from worry should loan rates start to escalate,” Garcia said.

The Bangko Sentral ng Pilipinas (BSP) has maintained an accommodative stance keeping the benchmark interest rate at a record low of two percent since November last year to allow the economic recovery gain more traction after slipping into recession last year due to the COVID-19 pandemic.

AUB introduced HRP as early as 2019, before the pandemic, as an added feature of its Preferred Home Loan product.

The program is extended to existing AUB home borrowers and covers rate protection for 10 years for a vacant lot, 15 years for a condominium, and 20 years for house and lot.

AUB offers HRP at fixed rates of six percent for one year, 6.5 percent for three years, and seven percent for five years.

This means clients who choose the one-year fixing rate of six percent, for example, will get their loan repriced at only 6.25 percent (additional 0.25 percent per year) if they pay their monthly amortizations on time.

Other banks reprice their home loans at an additional one to two percent every year, regardless of whether the borrowers pay on time or not.

“In addition, most banks also do not put a cap on where the interest rate increase will stop, unlike AUB. Once the loan reaches this rate, there will be no more additional rates,” Garcia added. AUB’s HRP puts a cap of nine percent

In August last year, the BSP raised the real estate loan limit of banks to 25 percent from 20 percent to encourage consumer lending amidst the COVID-19 pandemic, freeing up P1.2 trillion in additional liquidity for real estate lending.

Latest data from the BSP showed investments and loans extended by the banking industry to the property sector went up by 5.5 percent to P2.62 trillion in 2020 from P2.48 trillion in 2019.

“We are optimistic that the real estate industry will be among the sectors that will bounce back fastest once the economy recovers, which bodes well for consumer appetite for home loans,” Garcia said.