Homeowners brace for higher mortgage payments as SIBOR shoots past 1%

This is the highest in over six years.

Homeowners are in for higher mortgage payments after the Singapore Interbank Offered Rate (SIBOR) shot past the 1% mark yesterday.

Data from the Association of Banks in Singapore showed that the 3-month SIBOR reached 1.00129% on Tuesday, the highest in over six years.

Analysts note that though the SIBOR is still hovering at historically low levels, the spike will still cause homeowners to shell out bigger payments for their mortgages as most home loans are pegged to the 3-month SIBOR.

“A key risk to Singapore’s economy in 2015 is that the faster-than-expected rise in interest rates and tightening of liquidity conditions may contribute to weak growth. Increasing mortgage payments tied to short-term rates may cause private consumption to slow even further, even if we don’t necessarily expect potentially overleveraged households to undergo much trauma,” HSBC Economist Joseph Incalcaterra wrote in a report.

Deutsche Bank Chief Economist Taimur Baig noted that rising interest rates bring a plethora of risks although there is little sign of stress at the moment.

“Rates can rise in a disorderly manner, affecting heavily indebted consumers and businesses, especially those with property market exposure. Weakening of the SGD against the USD could affect portfolio and private banking flows, as well as hurt those with FX leverage,” he noted.

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