Singapore Rate Jump Threatens Property Prices

A sudden new-year jump in Singapore interest rates threatens to push up mortgage costs and steepen a slide in home prices.

The three-month Singapore interbank offered rate, against which most home loans are benchmarked, has risen 18 basis points to 0.6392 percent this year to the highest since April 2010, driven by a stronger U.S. dollar and new liquidity requirements for Singapore banks.

Short-term interest rates may head toward 1 percent this year as a resurgent U.S. economy could spur the U.S. Federal Reserve to raise borrowing costs, according to United Overseas Bank Ltd. and Maybank Kim Eng Research Pte. A stronger greenback is also making U.S. dollar-denominated debt raised by Singapore banks more expensive to service. The island, which has S$177 billion ($132 billion) of outstanding mortgage debt, posted a 4 percent drop in home prices last year.


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