Bloomberg data showed the three-month Singapore Interbank Offered Rate (Sibor) , the rate at which banks lend to one another and is a widely used measure of the cost of funds, was fixed at 0.62052% at 11.30am on Tuesday (Jan 6), up from 0.57762% on Monday. This may be possibly increasing monthly repayments by a few hundreds of dollars, depending on the value of the home. The benchmark rate had been flatlining for much of the first half of last year until it began its slow rise from August, then rose steadily as the United States dollar rallied.
The lending rate is reviewed every three months. Assuming mortgage rates in Singapore rise to 2 per cent from around 1.5 per cent currently, a home buyer with an outstanding loan of S$500,000 and 20 years remaining will need to pay around S$2,530 a month, up from S$2,410. Should the rate rise to 3 per cent, the monthly payment will increase to S$2,770.
Ms Selena Ling, head of treasury research and strategy at OCBC, said at a seminar organised by the bank yesterday: “I project that SIBOR will be close to 0.7 per cent at mid-year and will rise to between 1 and 1.2 per cent by the end of the year.”
If interest rates rise at a slow and steady pace, home owners will be able to adjust. But if it is unwieldy and volatile, then that makes it a bit more tricky, because what you are seeing now is some correction in terms of property prices. Buyers whom overstretched and overleveraged might be more exposed to interest rate hikes. Thank god TDSR have been in place to prevent bubbles from forming. Total Debt Servicing Ratio framework will lower the risk of bad debt . It uses an implied interest rate of 3.5 per cent to calculate applicants’ loan eligibility.