Yen Kai's Idea Cast

This just in, my other SIBOR pegged home loan has dropped by about 0.09%, corresponding to the fall in the 3-month SIBOR. This again results in some savings in my monthly instalment, not a lot , but any amount is welcome.

Seems like i caught the dip in SOR just in time, and the negative SOR rate is actually worked into the overall rate! It should have been SOR + 0.99% and SOR happens to be –0.01% on that day. I guess banks actually do make a profit from taking up a SOR loan themselves and they're obligated to pass it on to consumers under the terms of the loan contract.

The Daily SOR chart looks rather different today. SOR rates are sub-zero! Initially i thought it was due to some error, but realized later that the negative figures are for real. This is probably mostly due to the plunging treasury yields, plus the Fed’s decision to keep record low rates till mid 2013 and low USD/SGD rates.

While the US debt default is still being debated, it seems quite certain that the US Credit Rating will be downgraded. What this means is higher interest rates. What will happens is, US treasuries will have to pay higher interest to attract buyers, since they’re deemed more risky than before. Such an increase in the yield of the US treasuries will ripple through other types of bonds and finally to mortgages also. Basically it means interest rates here (SOR and SIBOR) are primed to go up.

The title says it all, the 3-month SOR just dived almost 17% to 0.187!!

SOR 3-months has just fallen from 0.25% to 0.23% over the last 3 trading days as the Singapore Dollar (vs USD) rises from 1.2885 to 1.27966 over the same period.

SOR slid dramatically to 0.258% on Aug 23, arguably the historical low of all times, then sprang up again to above 0.3%. Incidentally, the 3-month USD Libor rate is also at 0.3% and has been falling and staying low. Exchange rate wise, USD/SGD has been stable at around 1.35 and probably did not play a big factor in the action of SOR.

News about home loan rates appear in the newspaper very sparingly, and this just happened last Saturday, showing up in the Straits Times with the headline “Cheaper home loans in store”. In a gist, the article says that “KEY interest rates that determine mortgage levels have fallen steeply, promising cheaper home loans but even leaner times for those with bank deposits. … The falling rates have followed the trend of the rates set by the United States Federal Reserve, which continue to be at historic lows. They have also come as the Singdollar has been allowed to strengthen since April.”

SOR fell to 0.31%, presumably the all time low. This is probably a result of the revaluation of SGD against USD from 1.39 to below 1.38, which makes it cheaper to repay loans denominated in US dollar.

Time flies and before you know it, the second year of my SOR-pegged loan is drawing to an end. The chart above shows my home loan interest rates over the past 2 years.