SIBOR stands for “Singapore Interbank Offered Rate” and is the rate at which banks lend to one another. Banks normally use it to determine mortgage loan interest.
After Sibor rates hit record low, banks are under pressure to offer cheaper loans. As today, the three-month Sibor was 0.4375% while the one-month Sibor was 0.3125%. It may be good time for some property investors to refinance their existing loans if they are paying a relatively high interest.
So what are the banks offering? As published in Sunday Times article “Low interest rates = Good time to refinance housing loans“,
Citibank is offering a one-month Sibor plus 0.7 per cent loan package. With the one-month Sibor at 0.218 per cent, this works out to effective interest rates starting from as low as 0.918 per cent throughout the loan tenure. Their customers can also switch between one-, three-, six- and 12-month Sibor tenors, or from a floating rate to a fixed rate free of charge.
OCBC Bank’s deal has a three-year lock-in, and on top of the three-month Sibor, has a spread of 0.55 per cent for the first year, 0.6 per cent in the second, 0.65 per cent in the third, and 1.25 per cent thereafter.
DBS Bank’s latest offer is pegged to the one-month Sibor or three-month Sibor, with a spread of 0.85 per cent for the first three years. For the three-month Sibor package, the interest rate is capped at 1.49 per cent for the first three years.
HSBC has a loyalty package, which is Sibor plus 0.9 per cent for the first year, 0.85 per cent for the second and 0.8 thereafter. There is a cash incentive of 0.4 per cent of the loan amount, capped at $10,000.
However, refinancing does come with risks and costs. Interest rate does not stay low forever, investors must understand the impact of rising interest rate.
Regardless of the prevailing interest rate environment, you should always assess what you can afford to ensure you are able to service a housing loan over a longer period of time.
You can use our easy to use online home loan tool to check and compare the latest and best loan packages for your Home Loan Refinancing. Just click the button below.