Singapore Home Mortgage Rates Expected to Rise 25-50 Basis Points Before Year-End

Financing a home could get more expensive soon as consumer banks appear to be gearing up for another round of rate hikes for their home loan offerings.  

Borrowing costs, especially on the residential property front, will get even more expensive soon.  

The six-month interbank rate, the benchmark at which banks price their deposit rates, has been rising steadily.  

It is now up by close to 40 basis points – to 3.6 and a quarter percent from the 3.25 percent at the beginning of this year.  

With floating home loan rates now about 3.25 percent, market watchers are expecting the banks to go for an increase soon.  

“If you look at six month interbank, it is about 3.5 percent, 12 months is three. Deposits tend to catch up with interbank over time, so logically, home loan rates should have some more upside in the months ahead. If you look at previous rate increases, it usually tend to be in the range of between 25 and 50 basis points, so I don’t see why future rates increases should be more aggressive,” said Tan Chia Seng, Business Director, Secured Assets Group, Citibank Singapore.  

Reminiscent of the mid-90s boom, more buyers are looking for investment homes.  

Consumer bankers are handling more cases requesting for second or third home loans.  

In the case of Citibank, since January this year, about 5 to 10 percent of its home loan portfolio were extended to multi-home owners.  

In the fiercely competitive home loans segment, Citibank has upped the ante by offering instant online home loan approvals, and such an aggressive marketing is paying dividends.  

“We have been growing very healthily. In fact our home loan book has doubled in the last five years and we continue to grow at a very fast pace, particularly after we introduced our five-year fixed rate with annual bonus. Since the launch in September, we have quadrupled in terms of our new sales volume,” said Mr Tan.  

Analysts say foreign players have increased their share of the home loans market from 20 percent in 1999 to about 40 percent now. 

Source: Channel NewsAsia, 02 August 2006 

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