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Thread: 3-month SOR and 2-month Sibor hits new high

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    Default 3-month SOR and 2-month Sibor hits new high

    Source: Straits Times Online
    Date: 15 Dec 2015


    SINGAPORE - Local interest rates are inching up and investors are on edge as the countdown to Thursday's decision by the United States Federal Reserve begins in earnest.
    It is widely expected that the Fed will raise interest rates from near-zero levels - the first such rise in nine years - and the effects are already rippling through Singapore's financial and currency markets.
    The greenback has strengthened against the Singdollar. More importantly, for mortgage holders and business owners, the cost of lending is going up.
    The three-month swap offer rate (SOR), a benchmark for commercial loans and some home loans, spiked to a new three-month high of 1.59168 per cent yesterday from 1.50597 per cent last Friday and 1.39520 per cent on Thursday. The previous high was at 1.56409 per cent on Sept 8.

    It is now almost four times higher than at this time last year.

    It is a similar story with the three-month Singapore interbank offered rate (Sibor). The Sibor, which is used extensively to price home loans, hit a two-month high of 1.12865 per cent yesterday and is now almost three times higher than its level 12 months ago.

    This means the monthly repayments on a $500,000 loan with a 25-year period pegged to Sibor will be $168 more than a year ago, while one pegged to the three-month SOR will be $262 more.
    The US rate hike has been flagged for several months, during which a rising number of home owners have switched to fixed-rate mortgages, and a new product pegged to fixed deposit rates was launched.
    SOR loans became popular around 2010-2011, when SOR started to dip below Sibor.

    Most home loans extended by DBS Bank, Singapore's largest provider of mortgages, are pegged to Sibor, with fewer than 500 based on SOR, said Mr Tok Geok Peng, its executive director of secured lending.
    Personal finance portal MoneySmart.sg estimates that 45 per cent of mortgages are pegged to fixed deposit rates, 50 per cent to Sibor and the remainder to SOR, based on loan take-ups in the past two months.
    ABN Amro chief economist Han de Jong noted that this will "undoubtedly be one of the best flagged rate increases ever, so it is hard to see how people can be caught off guard, but you never know".
    DBS Bank economist Eugene Leow said: "We expect a 25-basis point hike but much of this has already been priced into the market.
    "We suspect that Sibor and SOR rates will likely rise by a smaller magnitude than US rates."

    DBS sees Sibor at 1.4 per cent by the first quarter next year.

    The rate talk has also hit stocks and currencies as investors wait on the sidelines for a decision. The US dollar rose from 1.4095 to the Singdollar last Friday to 1.4129 yesterday while local share investors, who seem determined to keep their powder dry until later in the week, left the benchmark Straits Times Index down 0.69 per cent yesterday.

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    If you haven't now would be a good time to look into your refinancing options. If you need advice, please send me a PM and I'll be glad to help.

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    Hold your horses ....

    rates are higher, in particular, 2mth and 3mths .....due to ................................


    Lunar new year effect ...


    its an annual 'event' ... chinese will withdraw lots of cash ... new notes ... for chinese new year ... hence rates will be higher ..

    the above article was written in Dec 2015 ...hence 2mth and 3mths ( crosses the CNY period) went up..


    Now that we are in Jan ..and CNY is early Feb 2016 ... so expect Sibor 1 mth to remain high ... while 2mth will come off ....

    notice 3mths and above not moving right ?

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    There's no 2 month sibor in the market, the reason why 1 month sibor may be higher is due to it being calculated based on one month reference, thus the volatility and impact being more visible compared to 3 months whereby it's the average for the past 3 months.

    3 month sibor means past 3 months average, it is NOT what is expected in 3 months time.
    For example, curent 12 month sibor is at about 1.3% but it does not mean by forecasting December sibor to be around 1.3%.
    It derives from the past 12 months sibor average.

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    Quote Originally Posted by MortgageGuru View Post
    There's no 2 month sibor in the market, the reason why 1 month sibor may be higher is due to it being calculated based on one month reference, thus the volatility and impact being more visible compared to 3 months whereby it's the average for the past 3 months.

    3 month sibor means past 3 months average, it is NOT what is expected in 3 months time.
    For example, curent 12 month sibor is at about 1.3% but it does not mean by forecasting December sibor to be around 1.3%.
    It derives from the past 12 months sibor average.
    "In the United States, many private contracts reference the three-month dollar LIBOR, which is the index resulting from asking the panel what rate they would pay to borrow dollars for three months."

    I thought SIBOR and LIBOR works the same way. By asking the panel for future interest rate pricing.

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    Quote Originally Posted by indomie View Post
    "In the United States, many private contracts reference the three-month dollar LIBOR, which is the index resulting from asking the panel what rate they would pay to borrow dollars for three months."

    I thought SIBOR and LIBOR works the same way. By asking the panel for future interest rate pricing.


    yes you are correct ...while MortgageGuru is wrong...

    SIBOR or LIBOR or Whatever-bor is the rate for that particular tenor..


    in the actual money market, there are :
    O/N ( over night), T/N Tomorrow-next, S/N Spot Next,
    1wk 2wk 3wk 1mth 2mth 3, 4 , 5, 6 9, 12mths ...

    its just that the banks do not offer ALL the tenors for housing loans...



    please check back on past entries that i have posted.
    i did give a detailed explanation of what is SIBOR and how they are derived ...

    MortgageGuru's definition of 3mth sibor is totally wrong.

    it is NOT the past 3mths average ... nor have i said it was what's expected in 3mths time.

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    My apology on the 3 month sibor issue, been busy recently thus the wrong information.

    Sibor rates are derived by participating banks submitting their calculation for the relevant period and average out by ABS.
    As to how they derived at the calculation, I have no idea about it though.

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    Quote Originally Posted by MortgageGuru View Post
    My apology on the 3 month sibor issue, been busy recently thus the wrong information.

    Sibor rates are derived by participating banks submitting their calculation for the relevant period and average out by ABS.
    As to how they derived at the calculation, I have no idea about it though.
    To err is human

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    Quote Originally Posted by indomie View Post
    To err is human
    And....to smoke is salesman....

    Even after making a mistake still want to cover up by claiming one is busy. Fundamentals one do not mistake even when sleeping. Shows a lot about the quality of such a sales person whose objective is just to earn commission. Nothing against an honest living but to smoke ones way through life leaves a bad taste.

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    Quote Originally Posted by HP65 View Post
    And....to smoke is salesman....

    Even after making a mistake still want to cover up by claiming one is busy. Fundamentals one do not mistake even when sleeping. Shows a lot about the quality of such a sales person whose objective is just to earn commission. Nothing against an honest living but to smoke ones way through life leaves a bad taste.
    So after Sibor stabilised, is it better to loan in Sibor or other mortgage packages?
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

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    Quote Originally Posted by HP65 View Post
    And....to smoke is salesman....

    Even after making a mistake still want to cover up by claiming one is busy. Fundamentals one do not mistake even when sleeping. Shows a lot about the quality of such a sales person whose objective is just to earn commission. Nothing against an honest living but to smoke ones way through life leaves a bad taste.
    Hi, not sure if you're referring to me, but if it is... I'd like to clarify as I've been busy recently and probably I replied when I wasn't on 100% focus.
    I do not understand the rationale of you picking on me as I didn't hold any ill-intent or like what you said about commission driven and thus not keeping the interest of consumer at heart.
    It does not serve any purpose or increase any sales when I mentioned about sibor.
    I have nothing to hide. Please don't take it personal.
    I'm here sharing info, helping others and helping myself at the same time too. You don't have to be negative.

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    http://www.businesstimes.com.sg/gove...-china-persist

    The benchmark three-month Singapore interbank offered rate (Sibor), typically used to price home loans, rose for the fourth consecutive day to 1.25200 per cent on Wednesday;

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    So Fed rate increase only 0.25%, and SIBOR went up by 0.85% !
    Wow!
    Going by this rate, if Fed rate may go up to 3.5%, SIBOR may go up to 11.9% !

    Quote Originally Posted by onlooker View Post
    http://www.businesstimes.com.sg/gove...-china-persist

    The benchmark three-month Singapore interbank offered rate (Sibor), typically used to price home loans, rose for the fourth consecutive day to 1.25200 per cent on Wednesday;

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    Quote Originally Posted by teddybear View Post
    So Fed rate increase only 0.25%, and SIBOR went up by 0.85% !
    Wow!
    Going by this rate, if Fed rate may go up to 3.5%, SIBOR may go up to 11.9% !
    I am not sure our SIBOR is that closely tied to Fed rates. SIBOR has shifted even before Fed's have done so. It is anticipatory rather than reactive.

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    Is SIBOR another case of when Fed rate goes down to 0.25%, it takes a LONG LONG time to reach even 0.4%.

    However, before Fed rate even goes up, it quickly climbed to almost 1% already!

    Wow! Anticipatory indeed! Another case of head or tail the bankers always win???????

    Quote Originally Posted by PropVestor View Post
    I am not sure our SIBOR is that closely tied to Fed rates. SIBOR has shifted even before Fed's have done so. It is anticipatory rather than reactive.

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    Quote Originally Posted by PropVestor View Post
    I am not sure our SIBOR is that closely tied to Fed rates. SIBOR has shifted even before Fed's have done so. It is anticipatory rather than reactive.

    rates are fixed based on liquidity situation.

    med to long term rates are priced based on "expectations'..

    if mkt expects FED to keep raising rates, then it will be priced much higher.

    It depends on the different views of each banks' economists and analysts.


    I personally feel we are too "ahead' of the curve ...

    Fed may not hike more than what mkt expects, base on current economic numbers..


    which is why i am always against taking FIX rate loans ... go for floating rates ...

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    But if they can also fix the floating, nothing is floating really.

    Quote Originally Posted by proud owner View Post
    rates are fixed based on liquidity situation.

    med to long term rates are priced based on "expectations'..

    if mkt expects FED to keep raising rates, then it will be priced much higher.

    It depends on the different views of each banks' economists and analysts.


    I personally feel we are too "ahead' of the curve ...

    Fed may not hike more than what mkt expects, base on current economic numbers..


    which is why i am always against taking FIX rate loans ... go for floating rates ...
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

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    Let me throw a spanner: Is fixed rate really "fixed"?

    People who think they can benefit from fixed rate loans - Are they planning to redeem in full when their fix rate expires at the end of 2nd or 3rd year?
    If not, why take "fixed" rate which is not really "fixed"?

    Do they realize that once their "fixed" rate period is over, they always pay a MUCH HIGHER spread than others who took floating rate from a start?
    If they intend to take 10 years or more to pay off a loan, do they sincerely believe that they can benefit from those so-called "fixed" rate loan with MUCH higher spread once the fixed rate period expires??????

    Just a rough gauge:
    1) Fixed rate loan at 1.99% for 3 years.
    2) Subsequently 3M-SIBOR at spread 1.5% (basically 0.5% more than somebody who take up floating rate from the start).

    Say first 3 years save 0.2% interest p.a. or 0.6% total over 3 years.
    Then pay 0.5% more per year for next 20 years or 10% total more over 20 years!
    Wow! Does "fixed" rate loan seem really good deal now????

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    No spanner really. Fixed can float and float can be fixed. The difference over many years with interest roller coaster may not be much difference.

    Quote Originally Posted by teddybear View Post
    Let me throw a spanner: Is fixed rate really "fixed"?

    People who think they can benefit from fixed rate loans - Are they planning to redeem in full when their fix rate expires at the end of 2nd or 3rd year?
    If not, why take "fixed" rate which is not really "fixed"?

    Do they realize that once their "fixed" rate period is over, they always pay a MUCH HIGHER spread than others who took floating rate from a start?
    If they intend to take 10 years or more to pay off a loan, do they sincerely believe that they can benefit from those so-called "fixed" rate loan with MUCH higher spread once the fixed rate period expires??????

    Just a rough gauge:
    1) Fixed rate loan at 1.99% for 3 years.
    2) Subsequently 3M-SIBOR at spread 1.5% (basically 0.5% more than somebody who take up floating rate from the start).

    Say first 3 years save 0.2% interest p.a. or 0.6% total over 3 years.
    Then pay 0.5% more per year for next 20 years or 10% total more over 20 years!
    Wow! Does "fixed" rate loan seem really good deal now????
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

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    It's unfair to say that the thereafter will be 0.5% higher for the next 10-20 years down the road as I believe not many people are ignorant to leave it hanging there.
    SIBOR is volatile, anytime you can be paying much higher than fixed rates.
    From example people that took up fixed rate at 1.25%,1.45%,1.55% on 2015 Jan.
    Their commencement date 2015 April upon serving 3 months notice.
    So.. April, they're paying 1.25%, that's about the same as people who are on 3M SIBOR +0.8% SPREAD which goes to about 1.2%-1.4% area.
    As of today, 3M SIBOR takers are paying approximately 2% based on current spread while fixed rate holder still on 1.25% until April.
    There's already proven savings just on the first year, but, let's be conservative. We just compare the 2nd and 3rd year will do.

    Based on 500k loan amount at 25 years tenure from 2nd year onwards and assuming interest stays stagnant.

    The 2 years interest savings is already $4.8k.
    Assuming before the commencement of the 2nd year sibor package is at 2.5% effective rate, the savings will double up.

    I've said many times, there's no point in getting a low spread when the variable is volatile, especially in a upward trend now.
    Even if the spread for sibor is 0.3% there won't be much taker either.

    If taking a low spread is indeed good, why would bank drop their spread for sibor when interest rate is rising?
    Sibor was going at 0.8-0.9 spread in 2014-15 when interest from speculation to slow rise.
    And yet some banks are offering the spread to be at 0.6%-0.7%.
    It doesn't makes sense.

    To add on, the reason why people took up fixed rate is because that they can't foresee what's gonna happen 10 years down the road. They might just want to hold on the property for a couple of years and sell it off, take the earlier fixed rate for example. If they hold on to sibor for 3 years, they'd be making a loss of 10k.

    It's like holding on to the one dollar that let you buy foods and drinks to last a week in 1960s to 2016 now whereby one dollar can probably buy you a can of coke if you're lucky to find a machine that don't charge coke at $1.20.

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    Can't be 100% sure FED will raise 0.25% every Q wef Mar till Dec x 4times.
    Global market is definitely behaving weird. EM is struggling. US might be affected.
    Based on current World Economic Climate. Floating still a better Option.
    Dbs FHR going increased rate for mortgagees on previous 0.4% + Spread wef 1/3/16.

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    Quote Originally Posted by eric3417 View Post
    Can't be 100% sure FED will raise 0.25% every Q wef Mar till Dec x 4times.
    Global market is definitely behaving weird. EM is struggling. US might be affected.
    Based on current World Economic Climate. Floating still a better Option.
    Dbs FHR going increased rate for mortgagees on previous 0.4% + Spread wef 1/3/16.

    FED on hold this FOMC...

    some think 3 hikes (i/o 4), while others think we will only see 1 hike the entire 2016...

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    Think all will depend on US economy direction.......
    My bet: At most 1 more or possibly even 0 for the remaining of 2016..........

    Oh, if so, those who take up Fixed Rate loan in the short-end! Ouch!
    Those who take up Fixed Deposit pegged loan (eg FHDR) with super high spread for long term also at short end! (Wow! DBS make big money!)
    And all those "anticipation" about rate increase and SIBOR being jacked up by banks like no tomorrow - consumers also at the short end!

    Quote Originally Posted by proud owner View Post
    FED on hold this FOMC...

    some think 3 hikes (i/o 4), while others think we will only see 1 hike the entire 2016...

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    Quote Originally Posted by teddybear View Post
    Think all will depend on US economy direction.......
    My bet: At most 1 more or possibly even 0 for the remaining of 2016..........

    Oh, if so, those who take up Fixed Rate loan in the short-end! Ouch!
    Those who take up Fixed Deposit pegged loan (eg FHDR) with super high spread for long term also at short end! (Wow! DBS make big money!)
    And all those "anticipation" about rate increase and SIBOR being jacked up by banks like no tomorrow - consumers also at the short end!
    Ain't what you say basically that all borrowers are at the short end?
    That's like 讲有讲没有?

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    Quote Originally Posted by MortgageGuru View Post
    Ain't what you say basically that all borrowers are at the short end?
    That's like 讲有讲没有?
    u don't know the bear is LPPL one meh?
    “Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity.”
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    You still don't understand?
    If the banks are in collusion, the consumers will get screwed!
    Just like the relentless rise of SIBOR despite nothing significant to have caused it.........

    Quote Originally Posted by MortgageGuru View Post
    Ain't what you say basically that all borrowers are at the short end?
    That's like 讲有讲没有?

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    Quote Originally Posted by teddybear View Post
    You still don't understand?
    If the banks are in collusion, the consumers will get screwed!
    Just like the relentless rise of SIBOR despite nothing significant to have caused it.........
    Why didn't you say bank colluded to earn as low as possible for the last 8 years?

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    Colluded to earn as low or earn as much as possible?

    Quote Originally Posted by MortgageGuru View Post
    Why didn't you say bank colluded to earn as low as possible for the last 8 years?

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    Quote Originally Posted by teddybear View Post
    Colluded to earn as low or earn as much as possible?
    Low, as they kept the interest low.
    Are they out colluding to earn as low as possible? Why don't they raise the interest rate back then?������

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    Your comments is laughable.
    You mean they are doing charity to keep the interest rate low?
    And how much are they paying in deposit rate if they are charging that low rate + a 1% (or more) margin?
    No wonder some have to come with "creative" loan packages other than SIBOR pegged....
    You still don't understand how the rate is being derived that is why it is so low?

    Quote Originally Posted by MortgageGuru View Post
    Low, as they kept the interest low.
    Are they out colluding to earn as low as possible? Why don't they raise the interest rate back then?������

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