Industry watchers expect SIBOR to dip 0.5 percentage point in 6 months

The Singapore Interbank Offered Rate or SIBOR is expected to dip a further 0.5 percentage point over the next six months.

Industry watchers said this will present an opportunity for homeowners and companies to refinance loans on their properties.

The US Federal Reserve recently cut its benchmark interest rate to 2.25 per cent in a bid to prop up the American economy.

And this has indirectly put a drag on SIBOR – the rate at which Singapore banks lend to each other.

Financial planning firm SingCapital expects SIBOR to slide by some 0.5 percentage point in the short term, from the current 1.425 per cent.

Alfred Chia, CEO of SingCapital, said: “In the next 6 months we expect SIBOR rates to follow the Federal Reserve’s although not at the same quantum. The current interest rates fall is to combat the sub-prime issues in the US.

“So when Federal Reserve finds that they have handled that situation, the next issue they will be looking at is to combat inflation which will mean interest rates may rise back again.”

So financial planners said property owners could consider refinancing mortgage loans now, saving them money in interest payments.

And there appears to be no lack of choices for consumers when it comes to selecting loan packages.

Mr Chia added: “I would say DBS has always stressed on transparency to customers but lately we are seeing foreign banks coming in very aggressively.

“For example, Maybank, they offer first year at as low as 1.68, and for example Standard Chartered where they are promoting their SOR (swap offer rate) package.

“With so many activities happening for Singapore, F1, IR, Youth Olympics, definitely the demand for housing is growing, so in the long-term we are very confident about loans growth for the banks.”

Even though this may look like a good time to consider refinancing mortgage loans, industry players said homeowners should assess the different packages based on their individual needs.

They should also be aware of the potential risks arising from the US sub-prime crisis and inflation. – CNA/vm

Source : Channel NewsAsia – 24 Mar 2008

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