Mortgage rates expected to climb further due to rise in SIBOR

Singapore mortgage rates have risen on average by at least a third within the past month, amid an increase in Singapore’s benchmark interest rate.

Market analysts have said mortgage rates are expected to climb further in the coming months and more home owners are reviewing their financial position.

Mortgage rates for home owners on floating rate loan packages are estimated to have risen on average from about 1.5 per cent a month ago, to 2 per cent now, according to mortgage broker FindAHomeLoan. This comes amid a steady increase in the Singapore Interbank Offered Rate (SIBOR).

The benchmark lending rate was at 1.00529 per cent on Wednesday (Mar 25). This is more than double the figure at end-December, when it was around 0.45 per cent. According to market watchers, it could rise further to about 1.5 per cent this year.

Mortgage brokers said that in anticipation of further increases in SIBOR, more home owners are refinancing or repricing to fixed rate loan packages. They said about eight in 10 now opt for fixed rates, compared to just over half of home owners, two months ago.

Said Ms Maggie Ang, a mortgage consultant at FindAHomeLoan: “For customers who are still going for SIBOR-pegged packages, those are normally with a constant spread that they took a few years ago – say 0.7 per cent throughout. And they do believe SIBOR will not go up that high. So the overall interest rate for them is still low, so they may not want to change.

“But there are customers who deem that if SIBOR keeps going up, it will definitely affect their future monthly instalment, so they will change to fixed rate. Because if SIBOR keeps going up, and if they are not going to proactively look at refinancing to fixed rate, by the time they are looking at, it will be higher than what they are getting right now.”

Already, fixed rates too have started to climb. Banks contacted by Channel NewsAsia declined to reveal how their packages have been adjusted in recent months. But mortgage brokers said that on average, fixed rates for a two-year period have increased – from between 1.2 and 1.5 per cent just one month ago to above 2 per cent.

The rates could go up to 2.5 per cent in the next few months.

With both fixed and floating rates on the rise, one financial planner said home owners are taking measures to mitigate the impact.

Mr Alfred Chia, CEO of SingCapital, said: “You can use your idle cash or CPF to partially pay down outstanding loans, therefore reducing liabilities and interest segment. And of course for multiple property owners, you may want to take this opportunity to offload some of the properties. Based on our feedback from real estate salespersons, many people are going for this.”

Source : Channel NewsAsia – 26 Mar 2015

Join The Discussion

Compare listings