SIBOR rates and home loan repricing

[Pinobii]

Even though when took loan that time, most would be mentally prepared to take the risks else would have gone for fixed rates instead, still no one would hope for an increase

 

Interest rates the lower the better

[Kusje]

Even though when took loan that time, most would be mentally prepared to take the risks else would have gone for fixed rates instead, still no one would hope for an increase

 

Interest rates the lower the better

 

Goes w/o saying. When you take loan to buy a property:

 

1. lowest interest is always better

2. higher inflation is always better

[Sabian]

think quite tough lah. This rate hike is like the most confirmed rate hike ever... 

Symbolic gesture.

 

It's what happens after that I am more interested in. Some interpret further rates hikes after that is a short term negative but long term positive. (if the Fed is indeed looking at the strength of the economy and employment numbers before hiking rates)

[Pinobii]

Symbolic gesture.

 

It's what happens after that I am more interested in. Some interpret further rates hikes after that is a short term negative but long term positive. (if the Fed is indeed looking at the strength of the economy and employment numbers before hiking rates)

According to analysts, fed needs to increase interest rates now since US $$ has risen 30-40% last 2 years against currency such as jap yen, they need to increase the rates to show US economy is doing well

 

Possible symbolic as u said

[Showster]

From Today. 

 

Bro @OmOm might be inferring this intended effect of a rate hike? 

[OmOm]

From Today.

 

Bro @OmOm might be inferring this intended effect of a rate hike?

Inflation/deflation and interest rates are not directly linked. Traditionally lower interest rates provide a stimulatory effect on the economy because as borrowing costs decrease, consumers and corporates should spend more given the lower cost of funds.

 

However, in reality there is a middle component between the two and that is the willingness to spend. The situation today is that although money-printing has been rampant, only a fraction of easy money has been flowing out into the real economy. The rest has remained wedged in banks and financial institutions which are the first (or second in certain cases) layer to receive the funds.

 

This produces the unconventional outcome - super low interest rates without corresponding high inflation. Inflation in prices arises only because participants in the economy are competing for resources (products/services). If demand is low due to lack of willingness to spend or if supply is high relative to demand, inflation does not happen.

[Sabian]

Inflation/deflation and interest rates are not directly linked. Traditionally lower interest rates provide a stimulatory effect on the economy because as borrowing costs decrease, consumers and corporates should spend more given the lower cost of funds.

 

However, in reality there is a middle component between the two and that is the willingness to spend. The situation today is that although money-printing has been rampant, only a fraction of easy money has been flowing out into the real economy. The rest has remained wedged in banks and financial institutions which are the first (or second in certain cases) layer to receive the funds.

 

This produces the unconventional outcome - super low interest rates without corresponding high inflation. Demand Pull - Inflation in prices arise only because participants in the economy are competing for resources (products/services). If demand is low due to lack of willingness to spend or if supply is high relative to demand, inflation does not happen.

There are other factors that contribute to inflation.

 

For the USA:

Factors that usually cause cost push inflation are not there (yet).

 

Wage inflation is also not evident, for most of the wage earners in the US.

 

The USD is strengthening. Imported inflation (into the US) will also not rear its ugly head.

 

So the rate hike alone is not going to boost inflation numbers. Hence, it is very difficult to see a sustained rate hike after the symbolic 0.25 increase at the coming Fed meeting.

 

The only reason to hike rates beyond the coming 0.25 is the desire to "normalize" interest rates as rates have stayed ultra low for too long and there are undesirable (depending on which side you're on) side effects that come with that.

[Duckduck]

 

up upz n away!

Edited December 16, 2015 by Duckduck

[Voodooman]

Singapore interest rates rise ahead of Fed's decision

 

http://www.straitstimes.com/business/economy/local-interest-rates-rise-ahead-of-feds-decision?xtor=CS3-20

 

 

SINGAPORE - Local interest rates are inching up and investors are on edge as the countdown to Thursday's decision by the United States Federal Reserve begins in earnest.

 

It is widely expected that the Fed will raise interest rates from near-zero levels - the first such rise in nine years - and the effects are already rippling through Singapore's financial and currency markets.

 

 

The greenback has strengthened against the Singdollar. More importantly, for mortgage holders and business owners, the cost of lending is going up.

 

The three-month swap offer rate (SOR), a benchmark for commercial loans and some home loans, spiked to a new three-month high of 1.59168 per cent yesterday from 1.50597 per cent last Friday and 1.39520 per cent on Thursday. The previous high was at 1.56409 per cent on Sept 8.

 

It is now almost four times higher than at this time last year.

 

It is a similar story with the three-month Singapore interbank offered rate (Sibor). The Sibor, which is used extensively to price home loans, hit a two-month high of 1.12865 per cent yesterday and is now almost three times higher than its level 12 months ago.

 

This means the monthly repayments on a $500,000 loan with a 25-year period pegged to Sibor will be $168 more than a year ago, while one pegged to the three-month SOR will be $262 more.

 

 

 

The US rate hike has been flagged for several months, during which a rising number of home owners have switched to fixed-rate mortgages, and a new product pegged to fixed deposit rates was launched.

 

SOR loans became popular around 2010-2011, when SOR started to dip below Sibor.

 

Most home loans extended by DBS Bank, Singapore's largest provider of mortgages, are pegged to Sibor, with fewer than 500 based on SOR, said Mr Tok Geok Peng, its executive director of secured lending.

 

Personal finance portal MoneySmart.sg estimates that 45 per cent of mortgages are pegged to fixed deposit rates, 50 per cent to Sibor and the remainder to SOR, based on loan take-ups in the past two months.

 

ABN Amro chief economist Han de Jong noted that this will "undoubtedly be one of the best flagged rate increases ever, so it is hard to see how people can be caught off guard, but you never know".

 

DBS Bank economist Eugene Leow said: "We expect a 25-basis point hike but much of this has already been priced into the market.

 

"We suspect that Sibor and SOR rates will likely rise by a smaller magnitude than US rates."

 

DBS sees Sibor at 1.4 per cent by the first quarter next year.

 

The rate talk has also hit stocks and currencies as investors wait on the sidelines for a decision. The US dollar rose from 1.4095 to the Singdollar last Friday to 1.4129 yesterday while local share investors, who seem determined to keep their powder dry until later in the week, left the benchmark Straits Times Index down 0.69 per cent yesterday.

With Sibor at 1.4% plus bank's margin and housing rent creeping down (heard 3BR condo at The Luxurie, a new condo within walking distance to SengKang MRT, is now at $2500), more will be pumping in cash to service their monthly mortgage payment.

[Voodooman]

Good for you bro! It serves no purpose to hope for bloodshed cos end of day being so small, we too will be affected one way or another, perhaps only the top 10-15% of Singaporeans are cushioned.

 

Being in the finance industry, I know quite a few of these people and even they don't hope for bloodshed and in fact told me they hope for all round stability n prosperity for all Singaporeans so they they too can continue to enjoy their fruits and being humane, want fellow Singaporeans to enjoy the country's fruits as well. Maybe that's why they are in the top % of Singaporeans with this kind of humble attitude! Cheers n hv a good day ahead!!

You have a good heart.

 

People don't get rich ignoring the macroeconomic environment and to quote Warren Buffett, “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”.

[Staff69]

WEll said buddy! Glad that most of us here are human!

 

 

 

where the free uber ride you promise me

 

later i give you zero star then you know

[Kusje]

 

up upz n away!

Anything above 5 percent I will cut down on my savings level and try to pay off the loan asap.

[Kusje]

 

up upz n away!

Anything above 5 percent I will cut down on my savings level and try to pay off the loan asap.

[Showster]

I will either pay off or get another one when everyone is fearful even after all CMs are removed. But that will be a sad outcome for almost everyone in every sector.

 

Time to draw out the emergency stacks in the worst case scenario. 

 

But very unlikely as explained before.

 

 

Anything above 5 percent I will cut down on my savings level and try to pay off the loan asap.

 

[Lala81]

somehow most of the people i know are ultra conservative in terms of risk taking. 

They are really mostly in cash.

 

I think a lot of these folks are around. So donch worry hahaha 

Guess i don't hang out with overleveraged people lol.

[Piyopico]

I know next year is gonna be tough because everybody says so.

 

My friends in property tell me dun buy if you are looking for investments. Not in the next one or two years. Buy commercial if you really want to buy as yields are still good.

 

I believe it is self fulfilling. If everyone is cautious, naturally the economy will be bad next year. Fools venture where Devils fear to tread. However some will always say the best time to invest is when you see blood on the streets.

 

I like oil. Looks good over a 3years horizon. But it's more like a punt.

 

 

[Duckduck]

somehow most of the people i know are ultra conservative in terms of risk taking. 

They are really mostly in cash.

 

I think a lot of these folks are around. So donch worry hahaha 

Guess i don't hang out with overleveraged people lol.

 

http://www.straitstimes.com/business/economy/85352-singapore-consumers-60-days-or-more-overdue-on-their-credit-card-overdraft

 

80K+ singies are in trouble totalling $200M+... thats alot of assets to seize if they default

 

its gona get worse for them since rates are rising... even harder to pay back

Edited December 16, 2015 by Duckduck

[Darryn]

I know next year is gonna be tough because everybody says so.

 

My friends in property tell me dun buy if you are looking for investments. Not in the next one or two years. Buy commercial if you really want to buy as yields are still good.

 

I believe it is self fulfilling. If everyone is cautious, naturally the economy will be bad next year. Fools venture where Devils fear to tread. However some will always say the best time to invest is when you see blood on the streets.

 

I like oil. Looks good over a 3years horizon. But it's more like a punt.