How Much Will That Hike In Mortgage Interest Rate Cost You?

Since the start of 2015, the Singapore Interbank Offer Rate (SIBOR) has been going up, exceeding 1% as of end March. Together with the spread, the interest rate is around 2% now. Just how much will the housing loan cost you now with a higher SIBOR?

	1.5% Interest Rate	2% Interest Rate	2.5% Interest Rate	3% Interest Rate	3.5% Interest Rate
Purchase Price	$800,000	$800,000	$800,000	$800,000	$800,000
Loan Quantum	$640,000	$640,000	$640,000	$640,000	$640,000
Loan Tenure	25 years	25 years	25 years	25 years	25 years
Installment per month	$2,560	$2,713	$2,871	$3,035	$3,204
Usage of CPF Funds	$2,100	$2,100	$2,100	$2,100	$2,100
Cash Top Up	$460	$613	$771	$935	$1,104

* assuming a 2-bedder condominium unit in the suburbs, a couple contributing a maximum of $2,100 per month to their CPF ordinary account.

We can see from the table that the installment per month will increase by $153 if interest rate goes up from 1.5% to 2%. Not a lot. On average, every 0.1% increase in interest rate will see a borrower paying $31 more every month.

Can borrowers cope with the increase in installment? It depends on the borrowers' profile and spike in interest rate. In the worst case (3.5%), the cash top up is $1,104 per month.

If the borrower manages to find a tenant, he would not have to top up with cash. But in this current market, it will be tough.