{"id":31910,"date":"2020-03-17T15:06:45","date_gmt":"2020-03-17T07:06:45","guid":{"rendered":"https:\/\/www.99.co\/blog\/singapore\/?p=31910"},"modified":"2022-06-13T17:24:51","modified_gmt":"2022-06-13T09:24:51","slug":"are-home-loan-interest-rates-going-to-be-super-cheap-again","status":"publish","type":"post","link":"https:\/\/www.99.co\/singapore\/insider\/are-home-loan-interest-rates-going-to-be-super-cheap-again\/","title":{"rendered":"Are Home Loan Interest Rates Going to Be Super Cheap Again?"},"content":{"rendered":"
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Don’t count on low home loan rates<\/em>, they said. Home loan interest rates have been at 10 year lows, they can’t stay there forever<\/em>, they said. Well it looks like they were wrong on both counts, because Covid-19.<\/em> Now the Fed just cut interest rates to zero, and launched QE again. But can loan rates get super-cheap like they dud in ’09?<\/p>\n

Why are we expecting home loan interest rates to fall?<\/h3>\n
\"Woman
When the Fed cuts rates, SIBOR-based home loans get cheaper<\/figcaption><\/figure>\n

It’s due to the United States Federal Reserve (the Fed) slashing interest rates to zero<\/a>.<\/p>\n

The last time this happened was following the Global Financial Crisis in 2008\/9. At the time, the Fed also slashed rates to zero, and embarked on Quantitative Easing (QE).<\/p>\n

This had a knock-on effect in Singapore, sending the one-month SIBOR rate from around 1.7 per cent in January 2008, to as low as 0.4 per cent by January 2009.<\/p>\n

SIBOR, or the Singapore Interbank Offered Rate, is the median interest rate among 12 local banks. Many home loans in Singapore are pegged to SIBOR. So whenever the Fed lowers the interest rate, SIBOR home loan packages in Singapore tend to get cheaper as well.<\/p>\n

At present, the one-month SIBOR rate is at 1.32 per cent<\/a>, while the three-month SIBOR rate is at 1.34 per cent<\/a>. At the time of writing, there are home loan packages starting from as low as 1.48 per cent per annum.<\/p>\n

The big winners are the HDB owners who opted for SIBOR bank loans, back in 2009<\/h3>\n

These guys have really hit the jackpot. They would have been warned, a decade ago, that the low interest rate was a “quirk”. It was commonly pointed out that the “normal” home loan interest rate was around four per cent, and that the bank loans wouldn’t stay lower than the HDB Concessionary Loan rate for long.<\/p>\n

How did it pan out?<\/p>\n

\"Bank
Home loans have been even cheaper than HDB loans for over a decade, and it seems set to continue<\/figcaption><\/figure>\n

Well, from 2009 to the present, the average home loan rate has not gone above 2.1 cent. For close to half the typical loan tenure of 25 years, they’ve gotten away with a cheaper rate. And now, just when the Fed seemed to be normalising the rates, Covid-19 strikes.<\/p>\n

With rates slashed to zero again<\/em>, they may find themselves back to where they were in 2009: paying rock bottom rates, and laughing at everyone else.<\/p>\n

But does this mean the rest of us will have super-cheap loans too?<\/h3>\n

Will rates drop? Yes, almost certainly.<\/p>\n

Will it drop like it’s 2009 and it’s a dubstep beat? Almost certainly not.<\/p>\n

Some factors to consider are:<\/p>\n