Compare Singapore Home Loan: Sibor versus Inflation CPI
August 14, 2009 by property
Filed under Compare Singapore Home loans
Compare Singapore Home Loan: Sibor versus Inflation CPI
Many people say that, what happens if the interest rates go up? What will happen to my home loan installment?
When interest rates go up, your loan repayment becomes more expensive. Does that really hurt you?
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The common answer is yes, it hurts you due to more expensive loan.
However the answer can be NO, it does NOT hurt you. The reason for this is because during times when interest rates are high, Inflation(CPI) is also high.
If you have a house, a job, shares and other assets, those values tend to rise as well. It is mostly a zero-sum game. In some cases, those asset values rise faster than CPI rate or it could rise even more than the cost of your housing mortgage.
SINGAPORE BANKS CANNOT LEND YOU AT LESS THAN THE Consumer price index (Inflation – CPI)
The point is, banks cannot lend you money at a rate that is less than the CPI, otherwise their money will lose its value as those same money will only be able to Afford less goods and services.
WHEN DO Singapore BANKS REALLY MAKE MONEY?
Some say that in 2006 and 2007 banks make a lot of money. While they probably did make money, charging you 5% for your home loans, but CPI was at 6.5%, that means that their money is depreciating.
In fact they are losing money doing that. This is a very rare event in History.
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SO DOES INFLATION (CPI) AFFECT INTEREST RATES?
Absolutely YES!!! Inflation is the base line. If Inflation rises, everything rises along with it. Due to Inflation rises, Sibor or SOR will have to rise along side.
If SIBOR or SOR rises, there is NO DOUBT that the bank’s floating rates will also have to rise. How fast they raise rates will depend on how benevolent the banks are.
So what do you think the banks do? Are they benevolent?
I think you know the answer.
About Property Buyer Contact Property Buyer
www.PropertyBUYER.com.sg
We are a Research-focused Singapore Mortgage Consultant which helps you compare Singapore Home loans either for new home loans or refinance home loans, we balance risks versus rewards for each home loan to match your risk profile and financing needs.
Buying property is a serious affair, we do NOT advocate a Greed or fear based buying approach, we emphasize that you need to check your property home loan affordability. Check out the mortgage calculators.
Not Simply Cheap, but what Fits. We Research, You Save!
Tel: 6100 – 0608
SMS: 9782 – 8606
Email: loans@propertyBUYER.com.sg
Related posts:
- Compare Singapore home loan versus SME loans
- Singapore Home Loan: TO SIBOR or NOT to SIBOR?
- Singapore Economy: Why is SIBOR falling despite record Inflation (CPI)
- Compare Singapore home loan: Source of funds
- Singapore Home Loan: Sibor Risks
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My bank increased rates 4 times within 1 year in 2007. Fed up!