Property prices in Singapore have seen tremendous growth since independence. Many home owners have made enormous gains from home ownership and property investment. In 2019 alone, an estimated 50,000 homes* changed hands.
Even for the cash rich, chances are you will have to take a loan to finance your property in Singapore. Loans for property purchases is either fixed rate or floating rate. Buyers opt for fixed rate when they think interest rate will go up and vice versa. If the change is small, it does not make a big difference in the monthly instalments. But over the past five years, the 3-month SIBOR has been creeping up.
After hitting a high of 2.007% in May 2019, the 3-month SIBOR started to soften and weakened to 1.011% as of 24 Mar 2020.
Note: The 3-month SIBOR loan will vary from bank to bank.
Source: The Association of Banks in Singapore (2 Jan 2014 to 28 Feb 2020)
What does this mean for you as a consumer?
The impact is aplenty!
If we were to compare the current SIBOR-linked loan versus a floating home loan interest which could be as high as 2.6% in May 2019, the savings in monthly installments is huge.
You can potentially save up to $600 a month (see calculations below). This savings can be channelled into other investments or kept as emergency funds. A good opportunity to get your dream home or another asset if you could afford it!
Based on UOB 3-month SIBOR (1.011%) + 0.5% for 1st year
Source: Huttons Research as of Mar 2020
If you are exploring options under S$1 million, we have more than two dozen options for you! Contact any of your preferred Huttons associate or head over to Huttons News
to find out more.
* This is an estimate by Huttons based on HDB and URA numbers.
** The floating home loan interest in May 2019 is an estimate.