Invest in Singapore Property: Sibor and Inflation

Invest in Singapore Property: Sibor and inflation

Property Buyer Home Loan

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 Rising Sibor really hurt you?

The common answer is yes, it hurts you due to more expensive loan. However many people do NOT get hurt by Sibor rising.

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.

BANKS CANNOT LEND YOU AT LESS THAN THE 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 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.

SO DOES INFLATION 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 banks benevolent? I think you know the answer.

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