THE MARKET FOR PRIVATE HOME LOANS IN SINGAPORE

Abstract

The 'home loan war' in Singapore has been raging for decades now. Since the 1980s, banks have been poaching businesses such as home and car loans which traditionally were the mainstay of the finance houses. Indeed, according to the Monetary Authority of Singapore (MAS), the home loans market is now the only resilient business left for banks in Singapore. This study analyses the market share of the commercial banks in Singapore home loan market, in the light of the liberalization of the financial sector by MAS as well as the ever-changing consumers' needs. The findings not only revealed that the corporate strategies of banks do have a significant role to play in ensuring greater market share but also which banks have got the 'right formula' to succeed. The government is also instrumental in increasing the market share of the home loan market of local banks through its call for banking consolidation. This study also examined customers' choice criteria in the home loan market to find out if what the banks are competing on is really what the consumers look out for. In particular, the study investigates the relative importance of choice criteria and analyses differences in the importance of choice criteria with respect to a number of demographic and related factors. A quantitative study drawing data from 300 participants is employed. The study shows that choosing a home loan institution on the basis of lower interest rates is the most frequently cited choice criterion, followed by professional advice.