Buyers Take Advantage of Lower Sibor (13 Dec 2008)

Home loan borrowers take advantage on the low Singapore Interbank Offered Rate (Sibor) as interest rates dropped to about 0.9 percent this month.

Economists claimed the three-month Sibor would stay low until New Year.

With the rates continuously depressing, more and more home buyers look for Sibor-related loan bundles.

Geoffrey Ying, head of the mortgage division at financial advisory firm New Independent, approximates that 6 out of 10 customers consulting him inquires about Sibor-linked packages not only for buying high-end units, but also HDB flats.

He also said that only three to four out of ten customers show interest to Sibor-linked bundles last year when it was notably above one percent.

To illustrate this scenario, take for example buying an HDB flat. The best rate offered in town is 2.6 percent annual rate for qualified loaners. This rate is pinned at a level to only as little as above 0.1 percent of the prevailing CPF ordinary account interest rate.

If you are going to compare rates, for instance, with Standard Chartered Bank at a two-year lock-in deal, its Sibor-linked package to Sibor plus 0.95 percent, in the case of the bank.

Therefore in this case, a buyer can pay an annual rate of as little as 1.85 percent – lower than the usual HDB concessionary rate – since the Sibor stay at 0.9 percent.

However, experts say that the Sibor still has the tendency to go up, giving risks to the homebuyers.