Two key interest rates affecting mortgages and business loans here have fallen below 1 per cent after rising steadily recently.
The respite for borrowers - likely to be brief - came after the Singapore dollar rose in response to a Monetary Authority of Singapore (MAS) move this week to keep monetary policy unchanged.
The three-month Singapore interbank offered rate (Sibor), used to price many home loans, slid to 0.94654 per cent, its lowest since March 23. It hit a 12-month high of 1.02705 per cent on April 9.
Sibor has more than doubled since the start of the year, when it was 0.45738 per cent. But historically, it is still low. It hit a high of 3.56214 per cent on July 31, 2006.
Another key rate, the six- month swap offer rate (SOR) - commonly used to price commercial loans - has also fallen. From its high of 1.29498 per cent on March 23, the six-month SOR plunged nearly 30 per cent to 0.91081 per cent on Wednesday.
After rising slowly in recent months, the latest Sibor and SOR falls come as the Singdollar strengthened against the greenback, and recent soft United States data dampened prospects of an early interest rate hike by the United States Federal Reserve.
The Singdollar was trading at 1.3529 against the greenback yesterday, down 2.9 per cent from a year-high of 1.3929 on March 18. Home owners and business owners have a brief respite as loan repayments fall in tandem with the two rates.
But longer term, both rates are still set to rise, albeit at a slower pace, depending on when interest rate hikes occur.
Mr Saktiandi Supaat, Maybank Kim Eng analyst, said: "On the rate side, following this (MAS) policy move, we expect SOR and Sibor to ease slightly in the short term, however, external factors will continue to affect the upward pressure on rates towards the end of 2015. Three-month SOR and Sibor is expected to end this year around 1.2-1.5 per cent range."
Standard Chartered Bank lowered its SOR and Sibor forecasts. "We expect SOR to be range- bound this second quarter and gradually move higher towards end-2015, as a result of pricing in the expected Fed rate hike.
"We lower our Sibor forecasts in the wake of the MAS inaction," Standard Chartered said. "We now expect three-month Sibor to reach 0.95 per cent by the second quarter (1.2 per cent previously) and 1.25 per cent by end-2015 (1.5 per cent previously). We maintain our end-2016 three-month Sibor forecast of 1.9 per cent."
This article was first published on April 17, 2015.
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