Singapore Interest Rates (SG)

By: EconomyWatch Content   Date: 3 November 2009

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The Singapore benchmark interest rate stands at 0.38 %. In Singapore, the interest rate decisions are taken by The Monetary Authority of Singapore (Penguasa Kewangan Singapura). The official interest rate is the Singapore Interbank Offered Rate (SIBOR), or the rate at which banks lend to one another, which is closely tied to the Fed rate.

Singapore Interest Rates (SG): Effect on Property Prices

The economic downturn of 2008-2009 took its toll on the property market in Singapore, in tune with the rest of the world. In the heydays of the economic boom in the early 2000s to late 2007, property prices were sky high in Singapore. Raffles Street was one of the most expensive business districts in the world, running shoulder to shoulder with Wall Street and the Central London business district.

However in Q3 2008, property prices took a nosedive after a wonderful four-year rally. The residential price index dropped by 1.8% in Q3 and the price rises had dramatically slowed from the 31.2% year-on-year price increase in 2007. Singapore’s economy was already in a bad shape after the 1997 Asian economic meltdown. In 2007, Singapore’s residential property price index rose by 23.6%, after the 7.15% rise in 2006. Property prices in prime districts increased considerably more.

In the mortgage market scenario, the Central Provident Fund (CPF), Singapore’s mandatory social security savings program, has been at the centre of the homeownership campaign due to the dynamic interest rates. CPF contributions can be withdrawn, among other things, to purchase housing. As far as mortgages are concerned, interest rates are relatively stable as the monetary policy is implemented through the exchange rate.

The FOREX rate is used to adjust economic growth and inflation. The interest rate on housing loans has been at 5.56% since March 2008, down from the 5.73% imposed from June 2006 to Feb 2008. Low and stable interest rates have provided security for borrowers, although variable interest rate mortgages dominate the market.

Singapore Interest Rates (SG): Credit Cards in Singapore

Most banks and financial service providers in Singapore that issue credit cards have stopped charging annual fees. Thus, most credit card offers zero annual fee or no fees, etc. Although it stays only for the initial 3-4 years, the scheme has to be properly evaluated before subscribing to it. The credit card market in Singapore has become very competitive and so many companies have started introducing attractive rebates and rewards programs.

 

 


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