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SIBOR Home Loan At 0.26% Spread!

We do not usually advocate SIBOR home loans during this period when interest is expected to rise.  SIBOR is usually the first to respond to any tightening of liquidity in the banking system here when there is capital flight out for highest yields in US. Still there are those who would prefer a totally transparent and market-driven loan peg.  There is one bank that currently (as at Jun 2017) offers a special “below-the-line” deal to select top brokers with a spread on both 1-month and 3-month SIBOR that is so low that it is unheard of in the many years we have been operating as mortgage consultants.

At just 0.26% spread (or the mark-up above SIBOR) for the first two years of the loan, which coincides with the lock-in period as well, and with 3-month SIBOR now 0.99358 as at 16 Jun, this gives a headline rate in year 1 of just 1.25% which is lowest in the market.  Even after the first two years, the thereafter spread is still at a low of 0.36% which will apply from year 3 of the loan till the end unless one reprices or refinances out.

This offer is only for completed private properties with minimum loan amount of $500,000.  And the offer is not listed on our website as it is not a public offer.  It is made available only through select few mortgage distributors like for MortgageWise clients.  This is one of the reason why one should work with top-volume mortgage brokers rather than going direct to lenders sometimes as we are able to offer better or “deviated rates” (lower than what is publicly available) from time to time.  If you are keen on this package, contact us today.

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Why consider SIBOR when most are going for FDR (fixed deposit rate) home loans?  We give you three reasons to mull over.

1. Market-Determined Loan Peg

Notwithstanding the more volatile nature of SIBOR, it still has the benefit of a loan peg that is determined solely by market forces and not subject to the profit motive of any single lender unlike FDR (fixed deposit rate home loan).  Hence if SIBOR unexpectedly comes down which can happen at times, just like last year (2016) when 3-month SIBOR retreated from a high of 1.25 to 0.82 due to a sluggish Singapore economy, homeowners reap immediate interest savings unlike those on FDR home loans where lenders are proned to adjust upwards but not down when responding to SIBOR movements.

2. Decoupling Effect Of SIBOR With US Fed Funds Rate

It seems like the three consecutive quarterly rate hikes in the US has not yet translated into higher long-term Treansury yields and a higher dollar, and the ensuing rise in Singapore’s 3-month SIBOR.  It is hard to explain this anomaly but one likely reasoning has to do with how the global banking system is flushed with funds ever since the three rounds of QE.  Perhaps the recent announcement by US Fed to start trimming down its balance sheet of US$4.5 trillion progressively over the next few years will finally normalize things.  However, that is going to take time and meanwhile SIBOR might be on this unusually slow and treacherous path up which might be acceptable to some hoping for a few slips along the way.

3. Ridiculous Spread

We also think the ridiculous spread of 0.26% in the first two years (as opposed to the usual 0.60-0.70% for promotional rates) act as an added buffer in event of rate hikes within the first two years.  Thereafter the lock-in period would have ended and homeowners will be free to refinance to fixed rate should the pace of rate hike gathers steam.

Last but not least, this lender offers an interest-offset facility on its floating SIBOR packages which, as we have discussed in last’s week article, might be useful for those seeking to leverage up for higher yieldsSpeak to our consultants quickly if you are keen on this Special Deal for MortgageWise clients as it is ending soon unless the lender decides to extend it.

 

At MortgageWise, we seek to provide thought leadership in the area of mortgage planning in Singapore, taking deep dive into developments and news on mortgages & helping clients track interest rate movements.  We do not just go for one-time business with clients but rather choose to build long trusting relationships by giving truly independent advice to the extent of losing the deal.  We strive to become the first-choice mortgage partner for homeowners and the creditable distributor of mortgage products for banks and financial institutions in Singapore.

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