SIBOR Rate Hike 2015

SIBOR, short for Singapore Interbank Offered Rate, is a term that many property owners who take up bank loans are familiar with. For the uninitiated, it is the rate that banks lend to each other and is determined by the Association of Banks in Singapore (ABS). And for many consumers, it is the rate that their housing loans are pegged to.

Since the beginnning of this year, SIBOR has shot up sharply. The 3 months SIBOR has been consistently around 0.4% since November 2010 but is now more than 1%. That is an increase of more than 0.6% over a short-time span of 9 months. A whooping 150% increase in percentage terms!

It is known that interest rates will not stay low forever. It is however puzzling why rates move up this much this fast. The start of Singapore's interest rate spike appears to coincide with the US Federal Reserve's statement about a gradual increase in interest rates around late 2015. To-date, US's interest rate has not been increased.

SIBOR shot up even before the US's interest rate starts to move. It is almost inexplicable. The only reason I can think of is that banks are profit-driven commercial entities. The increase in the net interest income of DBS, OCBC and UOB for both Q1 and Q2 this year appears to validate this. Perhaps MAS should have greater oversight with regards to the pricing of SIBOR.

Drop a note below if the increasing SIBOR is affecting you! Or if you happen to be from ABS, do share of any better reason for this interest rate trend.