Tuesday, September 20, 2011

Home loans may creep up next year: analysts

SINGAPORE: Interest rates in Singapore may rise - from their lowest levels in 40 years - as early as March next year, according to analysts.

They say home loan refinancing is surging, but bank profitability and the rising cost of funds offshore may force the banks' hand.

Banks could be forced to raise their home loan interest rates as early as six months from now.

Low rates have hurt their profitability and they will not bear the razor-thin margins for ever.

Dennis Ng, CEO of HousingLoanSg.com said: "Banks may be forced to increase the interest margin on their housing loans. (With the three-month SIBOR at 0.35 per cent, even if they add in an interest margin of 0.6 or 0.7 per cent, the total interest rate would be about one per cent - and that, to a lot of banks, means that profitability is affected."

This means that home loans, which are currently in the range of 1 to 1.2 per cent, may go up as much as 0.3 percentage points by early next year. That is even if the Singapore Interbank Offered Rate, or SIBOR, component of home loans remains low.
 

Source : MediaCorp Pte Ltd by Linette Lim 

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