Banks charging higher loan rates in response to rising property market

TWO key interest rates that determine how much your home loan costs are near their all-time lows but borrowers taking out new mortgages may not be better off.

Borrowers usually benefit when these measures drop but this time banks are responding to the riskier economic climate and surging property market by charging more for loans.

The most well-known of these measures – the three-month Singapore Interbank Offered Rate, or Sibor – fell below 0.6 per cent on Tuesday. This brought it near the all-time low of 0.56 per cent struck in June 2003.

Another popular benchmark rate – the Singapore dollar Swap Offer Rate (SOR) – hit 0.307 per cent last Thursday. This was the lowest level in at least a decade, according to Bloomberg data.

The rates, already low as they track prevailing United States rates, which are at rock bottom, fell further last week after the Singdollar rose.

Borrowers can take out mortgages pegged to these measures but those who expect these loans will follow the two rates down will be disappointed. Some banks have upped the spreads that they charge above Sibor and SOR, making loans linked to the rates more expensive.- ST

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