Singapore SIBOR rate falls to 1.31%, lowest since Nov 2004

This article belongs to the Singapore SIBOR rate watch story arc.

channelnewsasia.com :

Industry watchers expect more homeowners to consider refinancing their mortgage loans as interest rates look set to dip further. In fact, mortgage and financial planning firm SingCapital has seen a three-fold jump in enquiries in the last two months. Property agents are also getting a crash course in mortgage planning, including answering questions about refinancing of home loans. This occurs when homeowners seek out more favourable loan packages from other lenders. Banks have also been enticing more customers with Maybank, Standard Chartered Bank and DBS among the most aggressive in the home loans market.

Industry players said it's the right time to refinance, which could save a huge amount in interest payments. Alfred Chia, CEO of SingCapital, said: "Just from last year itself, interest rate could be as high as 4%, compared to current rates where the average is about 2.5% per annum. There's a big difference over there. Based on what we can see, interest rates will continue to fall, till the next six months."

Market watchers expect interest rates to fall a further half a percentage point in the Singapore Interbank Offered Rate or SIBOR by September. It's partly linked to the recent cuts in US interest rates to contain the fallout from the sub-prime crisis. Even though this may look like a good time to consider refinancing mortgage loans, industry players said home owners should assess the different packages based on their individual needs. They should also be aware of the potential risks arising from the US sub-prime crisis and inflation.

- From the chart above, the 3-month SIBOR rate has fallen from a high of 2.56% back in Oct-Dec 2007 down to 1.31% in mid-March 2008. This level of low SIBOR interest rates has not been seen since Nov 2004.

Furthermore, given that the Singapore CPI inflation rate hit a 25-year record high of 6.6% in Jan 2008, the net result is that savers are being punished and borrowers are being rewarded. In recent weeks, we have seen savings accounts, fixed deposit accounts and money market funds have their interest rates or effective yields slashed across the board. On the other hand, we could be seeing a renewed wave of home loan refinancings and new mortgage loans being made, which will have the effect of fueling the Singapore property market for a while longer.

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