The three-month Singapore dollar Swap Offer Rate (SOR) is hovering at 0.2 percent, the benchmark for bank loans. MAS warns that at the ultra-low SOR, a 35-year, $1 million loan at 1 percent interest rate in the first year may mean "just" an installment of $2,823. But every 1 percent point increase will set you back by $500. If rates rose back to 2006 levels of 4 percent, that monthly installment could easily balloon to $4,300 monthly. The scariest part of the message is the $1 million example. Is this what they are planning to price HDB flats at? Is this going to be worse than the 6 million population target that caused so much misery?
People with money in the bank will see this as a glass half full (hurray, no more pathetic rates for their fixed deposits), rather than half empty. People who have more than the minimum sum of $131,000 in their CPF account, which was raised from the previous mandated $123,000. CPF Board said the new MS will apply to members who turn 55 from 1 July 2011 to 30 June 2012. According to the Future on Retirement Survey done by HSBC bank, most Singaporeans will have less than that minimum amount in total savings. Based on the HSBC survey, the average Singaporean has only $120,000 for retirement, and this sum includes non-CPF savings and investments.
So who are the people who made a buzz line for the over priced Centrale 8 DBSS flats, leading it to be over subscribed two times? Stock brokers will tell you these guys who drank the Kool-Aid must be the same lot who subscribes to the greater fool theory. Never mind the unearthly unjustified price tag, another fool around the corner will always be willing to pay more. Khaw Boon Wan has done his part by foretelling in his blog of the housing apocalypse to come. But, having cried wolf once too often, nobody knows what to say anymore.
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Another Madoff to add to pro-asset inflation policies of last 15 years. Key is when are THEY going to cash out?
ReplyDeleteEven with that kind of warning, what is MAS going to do if our banks decide to increase the lending rates generously but not their deposit interest rates ? Afterall our mercenary banks have a lot of tricks up their sleeve when it comes to fleecing their customers.
ReplyDeleteTalking about tricks, Sim Lian must have learned the trick from HDB to give their prospective customers a market subsidy of up to S$102K to make their DBSS Centrale 8 units more 'affordable'. Which means their shareholders will also receive a subsidy on their dividends eventually if there is any.
Just wondering among the 2 who is more greedy, Sim Lian or HDB ?
When interest rates go up, it will be glass empty situation for BOTH borrowers and savers. Remember, MAS manages S'pore monetary policy not by interest rate, but by exchange rate. So the SOR, board rates and overall lending interest rates will go up, but the deposit interest rates will remain stagnant. E.g. if lending rates go up 100%, deposit rates go up at most 10%.
ReplyDeleteThis can be seen from 2003-2007. The safest mortgage rate went from less than 1% to 4%. But deposit rates never went beyond 0.5% FD rates also barely hit 1.5%. Savers had to beg, bargain and cajole bank officers to get half-decent FD rates. Better to save your money in money market funds -- at least you get honest rate of returns that accurately reflect the actual interest rate environment.
Even CPF promulgated this S'pore bankster scam by linking CPF rate to FD rates. That's why we're still getting the same 2.5% for over 10 years already, even when inflation is over 5% and will probably hit over 6% this year, just like in mid-2008.
CPF is effectively working hand-in-glove with banksters and property tycoons by jacking up property prices and encouraging asset price inflation. Ordinary man-in-the-street will be tempted or forced to speculate in properties and other risk assets in order to get higher returns, instead of leaving their money to rot in low-interest savings deposits and CPF account which cannot even match inflation.
//Even CPF promulgated this S'pore bankster scam by linking CPF rate to FD rates. That's why we're still getting the same 2.5% for over 10 years already, even when inflation is over 5% and will probably hit over 6% this year, just like in mid-2008.//
ReplyDeleteThis is where most people's blood have been boiling for the past decades. They still are so blind to see how they are singlely-responsible for having singaporeans left behind in their retirements and old age. UTTER IRRESPONSIBLE! Where is their conscience when they go to sleep at night not thinking about how pple will have sufficient to catch up...instead they kept upping the ante of minimum sum and DDAge.
How much is in the GIC reserves 300-400 billions and we can't spare some change for the people?!!!!
Makes you wonder, are the reserves there in the first place (comfortably) or why are we in such mad rush to keep making up for more reserves?!! To make up for the losses?
Thanks, anon@1:08pm, I'm opening a multi-currency account asap. Already my NZ dollars have earned me 10 percent over the last 3 years - who cares about a strong Singdollar with pathetic returns?
ReplyDeleteRates go up and our assets still get enhanced; get ready for 99 year mortgages!
ReplyDeleteBuying into public housing for the first time is like getting IPO Shares.
ReplyDeleteSure make money.
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