Home owners face higher mortgage payments with rise in SIBOR

Home owners may face higher mortgage payments, following recent hikes in a key benchmark interest rate that housing loans in Singapore are based on.

According to data from Bloomberg, the three-month Singapore Interbank Offered Rate (SIBOR) was fixed at 0.62 per cent on Tuesday (Jan 6). This is up from 0.57 per cent on Monday. Last Friday, it was around 0.45 per cent, up from 0.4 per cent in October.

SIBOR is the rate at which banks lend to one another and it is a widely-used measure of the cost of funds.

Ms Selena Ling, head of treasury research and strategy at OCBC Bank, said: “Some of it is due to banks (competing) for deposits over the year-end, but the market is also starting to anticipate that the Fed will start to normalise interest rates somewhere in the middle of this year.

“So I think there is a little bit of preparation on that front. I think the rise in terms of the Sing dollar short-term rates will probably be more gradual than what we could potentially see from the US side.”

Many housing loans are pegged to three-month SIBOR. For example, OCBC offers home loans at SIBOR plus 0.85 percentage points for the first three years. The lending rate is reviewed every three months.

The bank said the three-month SIBOR could reach close at about 0.7 per cent in June, with potential for further upside to about 1 to 1.2 per cent at the end of the year.


Let us assume an outstanding housing loan of S$500,000 and 20 years remaining. With the current interest rate of 1.5 per cent, this works out to a monthly payment of about S$2,410.

If the interest rate is increased to 2 per cent, the monthly payment would rise to around S$2,530. Should the rate rise to 3 per cent, the monthly payment would be S$2,770.

Source : Channel NewsAsia – 6 Jan 2015

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