Mortgage rates on the way up

The Straits Times
www.straitstimes.com
Published on Mar 29, 2013
Mortgage rates on the way up
Home buyers will have to stump up more of their income for loan payment

By Esther Teo Property Correspondent

MORTGAGE rates here are on the rise and could continue climbing as funds grow tighter.

Many banks have them pegged to a key banking industry rate also known as the Singapore interbank offered rate (Sibor), the rate at which banks lend to each other.

Last year, that rate was Sibor plus 0.8 to 0.9 per cent but it rose to Sibor plus 1.15 per cent earlier this month, a Barclays report this month noted.

The Sibor has been hovering around 0.37 per cent to 0.38 per cent in recent weeks.

This hike could be partly due to Singapore's current very high level of credit as measured by the loan-to-deposit ratio, which at 97 per cent is at its highest level since 1999, Barclays analyst Sharnie Wong noted in the report.

This tightening has led to competition for deposits in recent months and some banks have already hiked mortgage rates by 25 to 35 basis points, she noted.

"If average funding costs for the banks rise further, we believe Singapore mortgages will be repriced higher, similar to the trend in Hong Kong back in 2011 and early 2012 when a liquidity squeeze caused banks to raise mortgage rates from as low as 0.9 per cent to 2.1 per cent currently," added Ms Wong.

Barclays analyst Tricia Song noted in a separate report that the spread in Sibor-plus home loan packages has risen further since the January cooling measures.

For instance, first to third year rates offered by DBS Bank for uncompleted properties rose five basis points from Sibor plus 0.85 per cent to Sibor plus 0.9 per cent after the curbs.

The margin after the third year is maintained at 1.25 per cent, the report noted.

Mr Timothy Kua, director of SmartLoans.sg, said he has also observed a 0.2 per cent to 0.3 per cent hike in rates in general across banks over the past three months.

"We believe that banks might be increasing rates on current home buyers to counter the overall drop in sales volume due to the cooling measures," he added.

"There is still a pool of first- time buyers in the market not affected by the cooling measures and banks might be trying to capitalise on that."

This increase means that home buyers will have to stump up more of their income.

For instance, assuming an 80 per cent loan-to-value ratio and a 30-year tenure, a borrower will take a $800,000 loan on a $1 million home.

Should interest rates rise from 1.5 per cent to 1.8 per cent, the buyer will have to fork out a monthly payment of $2,878 from $2,761 previously. In all, he would have also paid close to $42,000 more in interest.

Ms Wong also cited the possibility of the Monetary Authority of Singapore (MAS) introducing a risk weighting floor - regulating the amount of capital that must be held against residential mortgage books - that could limit housing credit and rising property prices.

This will ensure banks have buffers that can withstand sudden adjustments in asset prices.

While the MAS does not currently regulate mortgage risk weighting, this is a potential tool for it to use in the future to limit mortgage credit to cool housing prices, she said.

Hong Kong already did so last month with a 15 per cent floor to risk weight on new mortgages as part of its sixth round of cooling measures.

esthert@sph.com.sg

It seems less chance to have a good deal on next refinancing...

interest rate at beloe 2% is still consider cheap money if one look at inflation rate of 4 to 5% today.

> so cited the possibility of the Monetary Authority of Singapore (MAS) introducing a risk weighting floor - regulating the amount of capital that must be held against
> residential mortgage books - that could limit housing credit and rising property prices.

That shows the intelligence and resolve of the HKMA. In 2008, HKMA also guaranteed bank deposits, AFTER MAS said there was no need to guarantee deposits.
After HKMA gave the guarantee, MAS changed stance and guaranteed Singapore bank deposits.

So, it shows our MAS is more a copycat. The HKMA has more out-of-the-box thinking than our MAS scholars.

This only affects current home buyers or home owners who are intending to refinance soon.

(29-03-2013, 07:51 PM)Contrarian Wrote: > so cited the possibility of the Monetary Authority of Singapore (MAS) introducing a risk weighting floor - regulating the amount of capital that must be held against
> residential mortgage books - that could limit housing credit and rising property prices.

That shows the intelligence and resolve of the HKMA. In 2008, HKMA also guaranteed bank deposits, AFTER MAS said there was no need to guarantee deposits.
After HKMA gave the guarantee, MAS changed stance and guaranteed Singapore bank deposits.

So, it shows our MAS is more a copycat. The HKMA has more out-of-the-box thinking than our MAS scholars.

My opinion is that HKMA thinks for the pple. MAS thinks for the businesses. Just look at the differencev in approaches to the Lehman saga. No secret that SG is a pro-enterprise outfit.

(29-03-2013, 08:19 PM)Muck Wrote:

(29-03-2013, 07:51 PM)Contrarian Wrote: > so cited the possibility of the Monetary Authority of Singapore (MAS) introducing a risk weighting floor - regulating the amount of capital that must be held against
> residential mortgage books - that could limit housing credit and rising property prices.

That shows the intelligence and resolve of the HKMA. In 2008, HKMA also guaranteed bank deposits, AFTER MAS said there was no need to guarantee deposits.
After HKMA gave the guarantee, MAS changed stance and guaranteed Singapore bank deposits.

So, it shows our MAS is more a copycat. The HKMA has more out-of-the-box thinking than our MAS scholars.

My opinion is that HKMA thinks for the pple. MAS thinks for the businesses. Just look at the differencev in approaches to the Lehman saga. No secret that SG is a pro-enterprise outfit.

I beg to disagree. By the end of 08, US was effectively guaranteeing deposits where ironically failed banks globally that was nationalised was flooded with money. HKD was pegged to the US$ and extreme risk averseness would have caused a massive capital flight from HK. MAS had to copycat HK to stay competitive as a money centre

HK prides itself as a lasse faire economy yet it bowed to political pressure on Lehman. HK politics is controlled by the property tycoons and you don't regard that as pro-business?

I am pretty averse to us not sharing the upside of a few, while socialising their downside, from US bankers to Singapore car dealers.

(29-03-2013, 08:19 PM)Muck Wrote:

(29-03-2013, 07:51 PM)Contrarian Wrote: > so cited the possibility of the Monetary Authority of Singapore (MAS) introducing a risk weighting floor - regulating the amount of capital that must be held against
> residential mortgage books - that could limit housing credit and rising property prices.

That shows the intelligence and resolve of the HKMA. In 2008, HKMA also guaranteed bank deposits, AFTER MAS said there was no need to guarantee deposits.
After HKMA gave the guarantee, MAS changed stance and guaranteed Singapore bank deposits.

So, it shows our MAS is more a copycat. The HKMA has more out-of-the-box thinking than our MAS scholars.

My opinion is that HKMA thinks for the pple. MAS thinks for the businesses. Just look at the differencev in approaches to the Lehman saga. No secret that SG is a pro-enterprise outfit.

On one hand, people criticizing CPF monies been withhold, and arguing gov should let individual to take care of their monies.

On the other hand, people criticizing MAS put too much freedom on investment, when thing turn ugly e.g. Lehman saga, it should bear the responsibility.

Hmm... more freedom or more control (protection)? or best of both world?

(30-03-2013, 11:06 AM)CityFarmer Wrote: On one hand, people criticizing CPF monies been withhold, and arguing gov should let individual to take care of their monies.

On the other hand, people criticizing MAS put too much freedom on investment, when thing turn ugly e.g. Lehman saga, it should bear the responsibility.

Hmm... more freedom or more control (protection)? or best of both world?

personally, i think:

if u are able to manage ur own money, then what the G does with ur CPF is not going to matter much.

if u are not able to manage ur own money, then u shouldn't touch ur CPF.

rather than thinking of 3000 ways to "optimise" one's CPF, it is better off to think of ways to increase ur productivity/value add leading to better income, and reduce one's expenses.

Quote:My opinion is that HKMA thinks for the pple. MAS thinks for the businesses. Just look at the differencev in approaches to the Lehman saga. No secret that SG is a pro-enterprise outfit.

Naturally of course! We all know Singapore has been run by the Papies more like a Corporation than a Nation. Run like a Corporation is not too bad but at the expense of the ordinary workers's B,S & T is really bad. i think Papies is slowly realising the people can't take it anymore.