With headlines on HDB’s Cash-over-valuation (COV) crashing through the roof and private home sales crawling like snails, the murmurings of a possible increase in mortgage interest rates have started to surface in the neighborhood coffee shops.
Is it time to be concerned about hiking rates? You bet it is!
Taking an average loan size of $500,000 over a loan period of 20 years, a jump in interest rate from a comfy 1% to 2.5% would mean forking out at least an extra $350 from your pocket every month. That’s $4200 a year or 4 trips to Bangkok, or 3 trips to Hong Kong or 2 trips to Bali….ok you get the point. Extra money given to the bank and none for yourself. Zilch!
But hey, that’s not fair you say! Sure it’s not! How did that happen? Or rather WILL it happen to me?
Let’s look at what the situation has been with our interest rates in the past few years during the Global Financial Crisis (GFC) starting in 2007.
With the falling out of banks and governments rushing to bail them out, Singapore’s Interbank Offer Rate (SIBOR), and Swop Offer Rate (SOR) started declining following the US Federal Reserve’s moves to cut rates in the US to save and kickstart the US economy. Starting in 2010, Sibor and SOR rates begin to plateau, hovering at an average of 0.5% in subsequent years. SOR even managed to dip lower to below 0% in late 2011! For those of you who have bought your dream condo then, your interest rate would have been incredibly low at about 1% or less.
That explains why you’ve been throwing the bank statements aside after seeing how measly low the monthly installment was, until it shot up recently if you’ve been on a board rate loan package.
We then witness the lowest interest rates in 2012 to mid-2013 at 0.38% for 3mths Sibor. Since then, the rates have been creeping back up to 0.4% and higher till date.
Would you like to find out if you are overpaying on your mortgage? Do contact us, for a non-obligatory review of your loan portfolio.
Will interest rates start skyrocketing or dip back into the drains in the next few years?
Stay tune as we continue our analysis in the next article on what may possibly happen ….