Money, money and more money! The recent news about the US
interest rates hikes has hit our shores in Singapore and the news
is not entirely encouraging.
The three-month Sibor, which is used to price
most loans and mortgages here, has been inching its way upwards due
to interest rate hike in the United States and a weakening
Singapore dollar versus the greenback. The recent announcements by
MAS to reduce the Singapore dollar from appreciating aims to keep
the Sibor elevated.
The Sibor is fixed daily by the Association of Banks in
Singapore based on quotes from banks on what they expect to pay for
interbank loans that day. In short, it is affected by liquidity in
the banking sector.
“The reduction of the appreciation slope could keep pressure on
the US and Singapore dollar exchange rate and thus could ensure
Sibor remains at current levels … This move by MAS helps keep
Singapore policy on a stable footing, and we expect it to be
modestly beneficial for Singapore bank earnings,” analysts from
Morgan Stanley said in a research note.
Many housing loans offered by banks are tied to three-month
Sibor. Oversea-Chinese Banking Corp (OCBC), for example, has 3
types of home loans and one that is currently offering home loans
at three-month Sibor plus 0.85 percentage points for the first
three years, according to its website. Lending rates are reviewed
every three months. As the Sibor is set to increase, so will the
interest rate rise. Home owners will eventually face higher
mortgage payments.
“We had expected the bullish move in the SOR and Sibor since
last year,” says UOB economist Francis Tan (source)
Analysts are looking at further upside to about 1 to 1.2 per
cent at the end of the year. Effectively leading to an interest
rate of about over 2% for home loans.
Let us assume an outstanding housing loan of S$500,000 and 20
years remaining. With the current interest rate of 1.5 per cent,
this works out to a monthly payment of about S$2,410.
If the interest rate is increased to 2 per cent, the monthly
payment would rise to around S$2,530. Should the rate rise to 3 per
cent, the monthly payment would be S$2,770.
Higher interest rates charged by banks affect your loans
directly. Thus you will see your loans, home mortgage loans,
renovation loans slowly inching its way up.
Hence start reviewing your loans! For example, review your home
loan packages every two to three years. Look at the trends
Conventional wisdom has it that you should review your loan package
every two to three years, or before the promotional period ends and
your bank raises its premium on the interest you pay, which
increases your monthly instalments.
In short, think long term and look around for good deals. Always
negotiate with the bank on refinancing options.
DPM Teo added that the improved situation was due to the tough
laws enacted, strong enforcement efforts against loan-shark
syndicates and the high level of community support in the fight
against unlicensed moneylending activities.
According to DPM Teo, about 1,900 people were arrested for
unlicensed moneylending and related harassment offences on average
yearly between 2011 and 2014, while about 2,600 were convicted in
court for these offences.
Debt Collectors in Singapore creating a fuss &
harrassment at Funan Digital Mall Singapore
Seen the recent hype about public harassment during working
hours? Debt collectors created a ruckus at Funan Mall over unpaid
debts. Moreover, this was during working hours infront of the
public eye.
With clamping down on unlicensed activities and harassment
cases, this is looking good for us licensed moneylenders at Empire
Global. The image of licensed lenders is changing for the better as
tougher laws are weeding out bad lenders. Thankfully, the ruly debt
collectors have been arrested for unlawful assembly.
Sources
http://business.asiaone.com/news/what-do-about-home-loan-interest-rates-rise
http://www.straitstimes.com/news/singapore/courts-crime/story/debt-collectors-who-created-scene-funan-mall-foodcourt-arrested-po?page=15