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SIBOR Crashed – A 1% Home Loan?

[NOTE: This is a time-sensitive article with offer that may end soon]

1% home loan? Not quite yet but soon.  At the rate that SIBOR is collapsing over the past week, suddenly the prospect of your home loan interest rate going all the way down to 1% becomes a real possibility.  However, you need to act fast.  Read on.

3-month SIBOR has crashed from its most recent high of 1.71% (as of 24-Feb) just two weeks ago to the current 1.21683% (as of 12-Mar) – an incredible fall of over 20%.  But that’s not the end yet.

We’ve always based our interest rate forecast on the strong correlation between the US Fed funds rate and 3-month SIBOR (see graph below which is plotted up till 6-Mar).  After the steep cuts of 0.50% by US Federal Reserve last Tuesday (3-Mar) which brought the fed funds rate down to 1.09%, we moved down our forecast range for 1-month and 3-month SIBOR from 1.60-1.80% to 1.30-1.50%. Already, we are teetering on the edge of this lower range and it’s looking likely to break below 1.30% soon.

The futures are now indicating a near 100% chance of another 25 basis points rate cut by Fed in its upcoming FOMC meeting on 17-18 March. This would effectively bring the fed funds rate down to a range of 0.75%-1.00%, or approximately 0.80%.  With the strong correlation between the two indices, we would then expect 3-month SIBOR to hurl towards a range of 0.90-1.10%.

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With deepening spread of the covid-19 virus within the US, Fed will be expected to do more.  If further cuts are made there is every possibility of SIBOR going to 0.80% within the next few months. At the moment, there are just two to three banks remaining still offering SIBOR floating rate home loan packages with ultra-thin spreads of just 0.15-0.20% in the first two years.  If you quickly sign onto one of these loans, your interest rate will be 1% when the above scenario plays out.  And perhaps at 1% for a good period time if interest rates continue to languish at such levels.  This is not a gimmick.

So, this is an urgent call to all homeowners out there to contact us quickly.  Especially if your current lock-in period ends within the next 6 months.  This couldn’t come at a better time!

How often does one enjoy a near 1% home loan?  Provided you act now!  We expect lenders to withdraw such low-spread SIBOR home loans anytime within the next two weeks or even earlier.  If spreads get revised up to 0.40-0.50%, you would have missed this “once-in-a-cycle” opportunity to lock down superb spreads and enjoy the prospect of a 1% home loan.  

Remember spreads tend to come up when SIBOR goes down.  This has always been the case.  And that’s the reason why we have switched to recommending SIBOR mortgage pegs on floating rates since the start of 2019.  That’s even before US Fed made a policy U-turn in March 2019 and started cutting interest rates three times last year.  Clients who took our advice last year would have seen their interest rates rolling off over the course of the past year.  There is still a small window for you to catch on to this ride. But closing fast.

Since 2014, MortgageWise.sg has provided thought leadership in the mortgage planning space in Singapore, seeking to build trust with clients over the longer term rather than product-peddling for quick one-time deals.  So, be it to refinance home loan, or to buy your next Singapore property, speak to our dedicated team of mortgage consultants here for the best home loan rates.

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