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AUB offers rate shield to homebuyers

The COVID-19 global pandemic has ushered in a prolonged period of low interest rates, with the Bangko Sentral ng Pilipinas (BSP) keeping its key policy rates at a historic low of 2%.

Borrowers, however, must not sit comfortably as rates will not scrape rock bottom forever. They must still brace for the sudden upsurge once the economy recovers, advised Reginald Neil P. Garcia, assistant vice president and team leader for Home Loans at Asia United Bank (AUB).

To protect its home loan borrowers from the steep increase of interest rates, AUB offers Home Rate Protect (HRP). “Our primary objective is to offer our clients a sense of security and free them from worry should loan rates start to escalate,” Mr. Garcia said.

The bank introduced HRP as early as 2019, before the pandemic, as an added feature of its Preferred Home Loan product. HRP 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 these fixed rates: 6% for one year, 6.5% for three years, and 7% for five years.

This means clients who choose the one-year fixing rate of 6%, for example, will get their loan repriced at only 6.25% (additional 0.25% per year) if they pay their monthly amortizations on time. Other banks, on the other hand, reprice their home loans at an additional 1% to 2% 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,” Mr. Garcia added. AUB’s HRP puts a cap of 9%. “Once the loan reaches this rate, there will be no more additional rates.” 

In August 2020, the BSP raised the real estate loan limit of banks to 25% from 20% to encourage consumer lending amidst the COVID-19 pandemic. The move freed up P1.2 trillion in additional liquidity for real estate lending, according to the regulator. Latest data from the BSP showed investments and loans extended by the banking industry to the property sector went up by 5.5% 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,” Mr. Garcia said.

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