Local interest rates have
been on a slow upwards creep, and on the first working day of the New Year,
rose to a 52-week high as the Singapore
dollar continues to weaken against the greenback.
The key
three-month Sibor, or Singapore interbank offered rate, on which most home loans
are pegged rose to 0.45738% on Jan 2, up 17.6% from the low of 0.38885% on Feb
21.
The benchmark
rate had been flatlining for much of the first half of 2014 until it began its
slow rise from August, then picked-up pace steadily as the USD rallied. The SGD
has fallen to four-year lows against the USD. At last Friday's 1.328, it is
down more than 7% from last year's July 23 high of 1.238.
Observers say Singapore
interest rates are now tied to the strength of the USD and will move further up
even in the absence of rate hikes from the US Federal Reserve. Expectations are
for the US Fed to raise rates in the second part of this year.
OCBC's forecast
for three-month Sibor is 0.55% and 0.69% for mid- and end-2015, respectively.
DBS projects that
the SGD will head to 1.33 by fourth quarter 2015 and 3-month Sibor to reach
0.60% then.
UOB is more
bearish - it expects that the start of the US interest rate normalisation in
June next year will see further downward pressures on the SGD this year. This
will in turn see Sibor moving on a higher trajectory in 2015. UOB expect the
three-month SGD Sibor to move towards 1.00% by end 2015.
Should home loan
borrowers worry? Some say the pace of the increase could be a concern but as
long as the absolute interest rate remains low, the hike in monthly instalments
should be manageable.
Info source: BT
Although many will probably brush this off, but the
wife and I certainly won't bet against a "perfect storm" of the US Fed raising
their interest rates earlier/higher than expected while the USD continues its
rampage against the SGD. If that happens, the absolute interest rate and
monthly mortgage instalments may not stay as manageable as earlier thought.
And it may be timely to revisit those fixed-rate loan packages again...
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