Singapore interest rate jump to weigh on property prices

Singapore

A SUDDEN new-year jump in Singapore interest rates threatens to push up mortgage costs and steepen a slide in home prices.

The three-month Singapore interbank offered rate (Sibor), against which most home loans are benchmarked, has risen 18 basis points to 0.6392 per cent this year to the highest since April 2010, driven by a stronger US dollar and new liquidity requirements for Singapore banks.

Short-term interest rates may head towards one per cent this year as a resurgent US economy could spur the US Federal Reserve to raise borrowing costs, according to United Overseas Bank and Maybank Kim Eng Research. A stronger greenback is also making US dollar-denominated debt raised by Singapore banks more expensive to service. The island nation, which has S$177 billion of outstanding mortgage debt, posted a 4 per cent drop in home prices last year. Home prices may fall a further 10 per cent by mid-2016, while short-term interest rates could top one per cent this year, more than double the level in 2014, said Vishnu Varathan, an economist at Mizuho Bank. "Ab…