After a lot of angst over whether Singapore’s property market faces a crisis, the city-state’s efforts to rein in household debt and home prices appear set for their first test as local rates begin to rise.
“Consumer demand has been quite weak already, weighed by the household debt issue,” said Michael Wan, an economist at Credit Suisse. “Any incremental rise in interest rates will be more negative for private consumption demand.”
Local rates have already started ticking up. Sibor, or the Singapore interbank offered rate, used as the basis for setting mortgage and other loans, climbed around 15 basis points in early January, to its highest since April 2010 after years of stability, Maybank-Kim Eng noted in a report this week.
The bank estimates a one percentage-point rise in Sibor increases monthly mortgage payments by 12 percent, under certain conditions. It expects Sibor will rise to 1.0 percent by the end of this year and 2.0 percent by the end of 2016, compared with 0.46 percent at end-2014.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.