Key benchmark rate rises to 6-year high

The 3-month Singapore interbank offered rate (SIBOR) on Friday rose to 0.973 percent – a level that has not been seen in six years after hitting 0.979 in 7 January 2009. This follows widespread expectations that the US Federal Reserve will raise benchmark interest rates by Q3 this year, and the continuing weakness of the Singapore dollar against the greenback.

SIBOR is a key interest rate at which banks loan to one another and is the rate to which most home loans are pegged at.

Since the start of the year, the 3-month SIBOR has more than doubled from its opening rate at 0.45 percent. To date, it has now increased by over 50 basis points.

In a recent report in The PropertyGuru newspaper market watchers said that with further SIBOR increases expected, banks have reported an increase in enquiries about fixed-rate loans – which provide certainty around repayments but often mean higher monthly repayments initially – as borrowers look for ways to minimise their exposure to interest rate hikes.

Tok Geok Peng, DBS Bank Executive Director of Secured Lending, said: “With the recent increase in the interest rate, we are now seeing more enquiries on fixed rate packages. Some home owners have also asked for alternatives to SIBOR-pegged floating rate packages.”

Last year, financial analysts said they expect the 3-month SIBOR to hit at least the 1 percent this year. But while the benchmark rate has been seen rising sharply, the rate is still well below historic levels. According to recent report citing market experts, most borrowers need not to be afraid – yet. They however advise to borrow prudently in the first instance, and take a long term view of interest rates, which are still at historically low levels.

“Regardless of interest rate trends, we strongly advise anyone with a housing loan to set aside funds as a buffer against interest rate hikes or any unforeseen circumstances. Ideally, one should set aside some savings in cash or liquid assets that can be used to pay for their monthly installments for the next two years,” Tok said.

“This gives you sufficient time to restructure your loan or even sell the property should you run into any financial issues,” she added.


Nikki De Guzman, Editor at CommercialGuru, wrote this story. To contact her about this or other stories email