Having done the latest round of online survey, i noticed that generally home loan rates are on the rise. Given that SIBOR is quite low now, banks may be making up for it by charging a higher margin. Even though many loans are tied to SIBOR, I suspect that the funds made available for home loans are not necessarily obtained from SIBOR linked sources and may come with a higher cost, which banks will have to recover by charging higher interest.
The Feds cut the federal funds rate from 1.0 percent to a range of zero to 0.25 percent. In addition to that, they continue to apply “quantitative easing” which “effectively means printing money”. The effect of money printing is already being felt with the US dollar easing against other currencies.
At the closing of this week, the 3 month and 6 month SOR fell to an eye-popping 0.68% and 0.74% respectively, the lowest levels since i started tracking, while the 3 month Sibor tumbled to 0.81%. The fall in the 6 month SOR is especially noteworthy, as it convincingly fell below 1%. This could possibly be taken as a signal that SOR will remain subdued for the next 6 months.
Sibor and SOR rates seem to be consolidating and staying low this week, both (3-month rates) maintaining below 0.9% consecutively for the last 3 days. There is perhaps a lack of driver, with Libor rates (3m USD) hovering around 2.15% – 2.30% and USD/SGD exchange rates holding at 1.53 for now. News of impending Fed Funds Rate cut, possibly to 0.5%, might just help to keep Sibor and SOR below 1% for the months ahead.
This week, Sibor fell to 0.89 percent, not far from the all-time low of 0.69 percent recorded on Nov 21, 2003. The 3m and 6m SOR touched lows of 0.78 and 0.94 respectively. Coupled with the expected weakness in the currency, the interest rates here will likely stay low for some time as anticipated. Good news for SIBOR or SOR pegged mortgagers.
Looks like the days of low interest rates are here: the 6 month SOR has fallen to 1.16%, the lowest level since i started tracking. If interest rates remain subdued, i should expect more savings yet again when my home loan interest, which is pegged to the 3 month SOR, is due for revision again. The timing couldn’t have been better – i’ve managed to escape the spike in interest rates brought about by the worldwide credit crunch.
