Sibor spike not a cause for worry?

A SPIKE in the three-month Singapore interbank offered rate (Sibor) may spell higher housing loan rates for some, but mortgage experts say there is no cause for worry given the low base enjoyed by home owners for the past few months.

The benchmark Sibor, the rate at which banks lend to each other, for three months fell as low as 1 per cent in August. Amid recent financial turbulence, it soared from 1.76 per cent last week to 2.23 per cent before hovering at around 2 per cent yesterday.

Mr Dennis Ng, spokesman for mortgage consultancy, said 2 per cent is still considered low, given that the Sibor was around 3.5 per cent about 18 months ago, at which time home loan rates averaged around 4 to 5 per cent.

Banks that Today spoke to acknowledged the latest upswing in the three-month Sibor will affect those with home loan packages pegged to the interbank rate.

Mr Dennis Khoo, Standard Chartered Bank’s Singapore general manager of lending, expects upside pressure on Sibor “in the immediate future”, causing the interest rates on Sibor-linked housing loans to move upwards as well.

“The current fluctuations in the short term rates will affect customers who have chosen packages pegged to the three and six-month Sibor,” said a spokesperson from DBS Bank.

According to Mr Bryan Ong from, homeowners can expect to pay about $80 – $300 more per month for an outstanding mortgage of $500,000, should the Sibor rise from 1.3 per cent, the average rate from February to early September, to 2 per cent.

Mr Ong, who provides mortgage consultancy for private properties via the website, also advised customers worried about the current spike to go for a 12-month Sibor fixed rate that is less volatile.

But such loan packages typically charge a higher rate as a trade-off for more certainty, noted Ms Annie Lim, managing director of Global Creatif Financial. “The majority of our customers have chosen the 12-month Sibor – where the rates are fixed for 12 months – and their monthly instalments will not be affected since the rates will only be refreshed every 12 months,” added DBS.

Mr Ng also added that loans pegged to banks’ internal board rates will also be influenced by Sibor – though it is harder to gauge the increase, as these board rates are less transparent.

Still, most experts expect the Sibor spike to be temporary, with Standard Chartered’s Mr Khoo predicting a dip below 1 per cent in early 2009 and remaining around that level for the year.

Source : Today – 30 Sep 2008

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