The Standard Chartered has recently introduced its new variant of home finance solution called 'MortgageOne' in the Bangladesh market.
Under this new home loan scheme, the customer's loan account is linked to a current account and the balance being maintained in the current account is used for offsetting the loan outstanding.
"The new home loan solution will be especially suitable for Bangladesh's emerging middle class, many of whom are first-time home owners," Chief Executive Officer of Standard Chartered in Bangladesh Naser Ezaz Bijoy said at a press briefing in the capital on Tuesday.
Officials also said that the new home loan product will offer lower effective interest rate and reduced loan tenure for the clients.
"With MortgageOne, clients will pay interest only on the differences between the loan balance and the fund held in the customer's current account linked to scheme," said Aditya Mandloi, Head of Retail Banking of Standard Chartered Bangladesh.
"The balance maintained in the current account can offset a maximum of 25 per cent on the loan amount," he added.
The bank officials also pointed out that when a client maintains balance in the current account, interest is calculated on the net balance. As a result, payments flow more towards the principal adjustment of the loan.
This results in a reduced loan tenure compared with a traditional home finance, they said.
"For example, in case of regular home finance, if a client takes Tk 5.0 million home loan at 10 per cent interest rate, he or she would have to pay a total of Tk 1374113 as interest in the end," Mandloi said.
"However, in case of MortgageOne, that interest amount can come down by 32 per cent to Tk 934,259," he pointed out.
"At the same time, the actual repayment period would also reduce from 60 months to 56 months in case of MortgageOne," he added.
"The linked current account allows the client to meet his or her transactional need as it offers the flexibility to withdraw balances from current account," Mandloi said.
The Standard Chartered can finance up to 70 per cent of the apartment price under the scheme and the maximum loan value can be Tk 12 million.
Officials also informed that MortageOne is a variable rate product where the rate is linked to the average rate of 182-day Government Treasury Bill.
The facility interest will be reviewed in every six months from the date of disbursement based on the movement of the average rate of 182-day Government Treasury Bill, they said.
When asked about the ongoing liquidity crisis in the local money market, Standard Chartered officials called for controlling the credit growth and simplifying the process of obtaining foreign currency loan.
"Recent jump in the oil price means that our import has increased which is ultimately widening our trade deficit and increasing the exchange rate of Taka against US dollar," bank CEO Naser Ezaz Bijoy said.
"As a result, many borrowers are now opting to take loan in local currency instead of greenback which is partly contributing to ongoing liquidity crisis," he added.
"To ease this liquidity crisis, steps should be taken for controlling the credit growth, reining in the non-essential imports and simplifying the process of obtaining foreign currency loan," Bijoy observed.
Bangladesh is the sixth country where Standard Chartered has introduced this MortgageOne scheme. Previously, this product has been launched in India, Malaysia, Singapore, Hong Kong and the UAE.
