reporter2
18-12-15, 16:55
http://www.businesstimes.com.sg/banking-finance/3-month-sibor-barely-moves-after-fed-hike-but-situation-wont-last
3-month Sibor barely moves after Fed hike but situation won't last
By Siow Li Sen
[email protected]
@SiowLiSenBT
Dec 18, 2015
THE key three-month Sibor or Singapore interbank offered rate barely moved on Thursday, rising a tiny 0.001 percentage point to 1.13375 per cent from Wednesday's 1.13275 per cent, following the overnight rate hike in the US.
But borrowers are unlikely to get off so easily, with expectations that the US Federal Reserve would raise interest rates throughout 2016, the 3-month Sibor could jump to 1.4 per cent over the next three months and reach 2 per cent by the fourth quarter of next year.
Home buyers could face higher monthly repayments of several hundred dollars more if the 3-month Sibor hits 2 per cent.
According to DBS Bank, for a 20-year S$1 million loan with a mortgage package of 3-month Sibor + 0.85%, the increase in monthly repayment is S$129 when 3-month Sibor reaches 1.4 per cent. If 3-month Sibor goes to 2 per cent, the increase in monthly repayment is a more painful S$417.
"It's important for borrowers to look at their cash flow now, because monthly repayment for home loans form a large part of their monthly household expenses," said Tok Geok Peng, DBS Bank executive director of secured lending.
Ms Tok said that borrowers could start to set aside more cash to prepare for higher monthly instalments or even consider making some capital repayments.
At Thursday's 1.13375 per cent, the 3-month Sibor - typically used to price home loans - is below this year's high of 1.13958 per cent reached on Sept 17. Still, it is almost three times the 0.44437 per cent level a year ago.
The US Federal Reserve, as expected, announced on Wednesday its first interest rate hike in almost a decade, signalling that the US has finally moved beyond the 2008 crisis.
Its policy-setting committee raised the range of its benchmark interest rate by a quarter of a percentage point to between 0.25 per cent and 0.5 per cent.
The three-month SOR or swap offer rate - a benchmark for commercial loans - rose at a faster pace to a new year-high of 1.61129 per cent on Wednesday, up from the previous 1.59168 per cent. The SOR which are based on forward rates are published at 8pm.
Analysts are expecting the Sibor to gain more briskly, in tandem with further US rate hikes.
"Yes, it is certainly true that the impact on the 3-month Sibor has been relatively muted thus far," said Eugene Leow, DBS Bank bank economist. "However, rising SOR does place some upward pressure on Sibor and moreover, we expect the Fed to move another four times in 2016."
Rising interest rates here will hit the Singapore property market, said Kelvin Tay, UBS Wealth Management regional chief investment officer. "We expect Sibor to rise to 2 per cent by end-2016. Our US economics team is forecasting another 75 basis points of hikes in 2016, and we expect Sibor to broadly track this.
"We expect spreads - the difference between the rental income versus the mortgage cost - to narrow considerably in 2016, against the prospects of weakening rentals."
Mr Tay said that a "further property price decline of 5-10 per cent in 2016 (based on UBS's estimate) could set the stage for a re-calibration of stringent property measures in the second half of 2016".
OCBC Bank forecasts 3-month Sibor to reach 1.45 per cent by Q1 2016 and 2.03 per cent by Q4 2016. It sees 3-month SOR hitting 1.75 per cent by Q1 2016 and 2.05 per cent by Q4 2016.
Said OCBC Bank economist Selena Ling: "Companies may face higher refinancing costs, while the man on the street may also face rising mortgage rates, but on the flip side, rising deposit rates and yields will also benefit savers and investors."
3-month Sibor barely moves after Fed hike but situation won't last
By Siow Li Sen
[email protected]
@SiowLiSenBT
Dec 18, 2015
THE key three-month Sibor or Singapore interbank offered rate barely moved on Thursday, rising a tiny 0.001 percentage point to 1.13375 per cent from Wednesday's 1.13275 per cent, following the overnight rate hike in the US.
But borrowers are unlikely to get off so easily, with expectations that the US Federal Reserve would raise interest rates throughout 2016, the 3-month Sibor could jump to 1.4 per cent over the next three months and reach 2 per cent by the fourth quarter of next year.
Home buyers could face higher monthly repayments of several hundred dollars more if the 3-month Sibor hits 2 per cent.
According to DBS Bank, for a 20-year S$1 million loan with a mortgage package of 3-month Sibor + 0.85%, the increase in monthly repayment is S$129 when 3-month Sibor reaches 1.4 per cent. If 3-month Sibor goes to 2 per cent, the increase in monthly repayment is a more painful S$417.
"It's important for borrowers to look at their cash flow now, because monthly repayment for home loans form a large part of their monthly household expenses," said Tok Geok Peng, DBS Bank executive director of secured lending.
Ms Tok said that borrowers could start to set aside more cash to prepare for higher monthly instalments or even consider making some capital repayments.
At Thursday's 1.13375 per cent, the 3-month Sibor - typically used to price home loans - is below this year's high of 1.13958 per cent reached on Sept 17. Still, it is almost three times the 0.44437 per cent level a year ago.
The US Federal Reserve, as expected, announced on Wednesday its first interest rate hike in almost a decade, signalling that the US has finally moved beyond the 2008 crisis.
Its policy-setting committee raised the range of its benchmark interest rate by a quarter of a percentage point to between 0.25 per cent and 0.5 per cent.
The three-month SOR or swap offer rate - a benchmark for commercial loans - rose at a faster pace to a new year-high of 1.61129 per cent on Wednesday, up from the previous 1.59168 per cent. The SOR which are based on forward rates are published at 8pm.
Analysts are expecting the Sibor to gain more briskly, in tandem with further US rate hikes.
"Yes, it is certainly true that the impact on the 3-month Sibor has been relatively muted thus far," said Eugene Leow, DBS Bank bank economist. "However, rising SOR does place some upward pressure on Sibor and moreover, we expect the Fed to move another four times in 2016."
Rising interest rates here will hit the Singapore property market, said Kelvin Tay, UBS Wealth Management regional chief investment officer. "We expect Sibor to rise to 2 per cent by end-2016. Our US economics team is forecasting another 75 basis points of hikes in 2016, and we expect Sibor to broadly track this.
"We expect spreads - the difference between the rental income versus the mortgage cost - to narrow considerably in 2016, against the prospects of weakening rentals."
Mr Tay said that a "further property price decline of 5-10 per cent in 2016 (based on UBS's estimate) could set the stage for a re-calibration of stringent property measures in the second half of 2016".
OCBC Bank forecasts 3-month Sibor to reach 1.45 per cent by Q1 2016 and 2.03 per cent by Q4 2016. It sees 3-month SOR hitting 1.75 per cent by Q1 2016 and 2.05 per cent by Q4 2016.
Said OCBC Bank economist Selena Ling: "Companies may face higher refinancing costs, while the man on the street may also face rising mortgage rates, but on the flip side, rising deposit rates and yields will also benefit savers and investors."