The Republic’s SIBOR increased sharply since 2 January and many home loans are to be affected. Experts say some home owners and buyers are already looking at other options to avoid the impact.
Singapore Interbank Offered Rate (SIBOR) is the rate at which banks lend to one another and is a widely-used measure of the cost of funds.
In recent months, SIBOR was seen inching up to around 0.4 percent for most of last year to 0.45 percent on 2 January due to the weakness of Singapore dollars.
Last week, however, figures of the 3-month SIBOR increased sharply from the first trading day of 2015 to 0.57 last Monday (5 January), and increased further to 0.62 per cent the next day.
SIBOR increased even further to 0.63920 percent on 8 January after a slight movement to 0.63707 percent the day before.
While this represents a 40 percent surge since 2 January, and to the rates recorded for most of 2014, experts believe that the current rating is still well below historic levels.
In an interview with a local media, UOB said “[SIBOR] is coming up from a very low base, so the increase looks magnified, but on a historical basis, we are still not anywhere near normal interest rates levels.” The bank explained that the rates for the 3-month SIBOR back in 2007 were many times higher than the current rate of 0.6 percent.
However, the rising benchmark rate would negatively impact homeowners and buyers, considering given that most housing loans in Singapore are pegged on the 3-month SIBOR. Media reports recently cited loan specialists saying they have been receiving more inquiries since the recent spike in benchmark rate.
In 2014, financial analysts expected the 3-month SIBOR to reach around 0.7 percent in June, and could potentially hit 1 to 2 percent at the end of 2015, with the US Federal Reserve set to raise interest rates by Q3 this year.
Due to this impending increase in monthly instalments, more mortgagors, who took out variable-rate loans on their houses, are now seeking to refinance to a fixed-rate loan, while loan specialists have received more inquiries since the recent SIBOR hike. It is noted that these mortgagors do not include those who took out refinancing options based on variable rate.
Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg.
