In going for the roof over the borrower’s head, Singapore’s moneylenders have been no less pernicious than latter-day Shylocks – indeed, every bit as artful and exploitative as the notorious Shakespearean character who coolly sought, as loan collateral, a pound of flesh. With the law amended to close an unfortunate loophole, Singapore’s moneylenders – or legalised loan sharks, as it were – can no longer avail themselves of the sales proceeds when desperate HDB flat owners resort to cashing out their homes for quick funds.

For the lenders, this is a sudden turn of events leaving them lamenting their fate, with nary a trace of guilt nor any sense of wrongdoing. And this is an industry officially represented by an association – the Moneylender’s (sic) Association of Singapore – that states, among its five objectives, a desire not only ‘to project moneylending as an important and integral part of the business of financing individuals and businesses’ but also ‘to advocate ethical practice in the moneylending industry’.

No doubt, moneylending (legal and illegal) plays a key role in consumer financing, and indeed in small business financing as well. The average person sometimes finds it hard to get a bank loan to pay off urgent bills or debts, especially if he or she is unemployed or a low-income earner. But, while the moneylending association has a self-declared aim of advocating ethical practices, its president felt free to explain, in a newspaper report in January, why his members were targeting HDB sellers in need of quick cash. Indeed, ads by moneylenders were essentially saying: ‘Only HDB sellers need apply’.

David Poh, the association’s president, was reported to have said: ‘If they take a personal loan which is based on their income, they may lose their job at any time, so it’s not so secure for us.’ Liquidating a HDB flat, on the other hand, virtually guarantees repayment, as the moneylenders – who would have lodged a caveat on the flat – get the first bite of the sales proceeds. The number of HDB resale applications with caveats lodged by moneylenders in just the first six months of 2010 has already exceeded the 2009 total of 546. The lenders might have insisted there was nothing unethical about this – indeed, it was entirely legal, until this week – but there was also collusion with housing agents who, for a fee, would refer flat sellers to lenders.

New rules in May ended the lucrative careers of lenders moonlighting as housing agents and vice versa, and a welcome new bill to regulate housing agents is on the cards. It remains to be seen how many of the several hundred moneylenders in town will actually close shop. If those weeded out are the firms that cannot thrive ethically, it would be no loss at all. And if the culling makes room for ethical, institutional microfinance to take root here and displace loan sharks, all the better.

Source: Business Times, 22 Jul 2010

The new law disallows Housing Board home owners from using the proceeds of selling their homes as collateral for loans, or for the payment of debts, except under approved circumstances.

Simply put, this means moneylenders are now no longer able to lodge caveats against flats to ensure they get first bite of the proceeds from the property’s sale if the borrower cannot pay up.

The Straits Times understands that at least 10 moneylenders who focus on loans for home sellers will be putting up the shutters in the coming weeks.

Moneylenders’ Association of Singapore president David Poh said at least 30 members in his association are extremely discouraged by the changes.

In May, new rules prohibiting licensed moneylenders from working as property agents, and vice-versa, were announced.

One affected moneylender, who declined to be named, said she used to lodge caveats for the four cases she handles on average monthly.

‘Now the law has closed all our options, we have no choice but to wind up,’ said the 37-year-old.

Another moneylender, who wanted to be known only as Mr Tan, 44, said he will now focus on his property business. He started a moneylending arm late last year to complement his realty work.

‘Now I just want to collect the loans I have given out, and close down the moneylending firm,’ he said, adding that he used to lodge about two caveats monthly. ‘Without caveats as security, who wants to risk lending out large amounts?’

The growing practice by some moneylenders of exploiting cash-strapped home owners desperate for loans was first flagged in Parliament in April.

Industry players estimate that of the 260 licensed moneylenders in the market, at least 30 per cent regularly lodged caveats on their borrowers’ homes. There were 556 registered resale applications with caveats lodged by moneylenders in just the first half of this year, a spike from 546 for the whole of last year and just 12 in 2008.

Mr Poh’s committee held a meeting yesterday to discuss the impact of the new rules. ‘Those affected are rethinking how to continue their business,’ he said, adding that most moneylenders will raise their interest rates by at least 10 percentage points per annum, now that they do not have the security of caveats.

The new rules could also put loansharks back in business. ‘The demand for loans is still there. But if the people can’t get loans, they will turn to the illegal lenders,’ said Mr Poh.

Source: Straits Times, 21 Jul 2010

Singapore banks’ heavy exposure to home loans and the strong climb in property prices in the past year have raised many questions, including the credit loss risks that banks face, it noted in a report. However, ‘a high savings rate and low household debt support borrower repayment ability when collateral values fall’, said Standard & Poor’s credit analyst Ivan Tan.

Negative equity (when the loan amount exceeds valuation of the home) by itself, is not a sufficient condition for default, he added.

Standard & Poor’s said that its view was based on the reasonable level of housing affordability, sound borrower repayment ability, low loan-to-value ratios, the government’s measures to cool the market, and mortgage rates turning upward. Mortgages represent the single largest industry exposure for Singapore banks, at about 25 per cent of loan portfolios.

The risk of financial losses to banks would increase if affordability declines, which could occur if property prices continue climbing or if household incomes slip, the rating agency said.

‘We believe an unabated increase in property prices is unlikely, given the government’s past willingness to implement cooling measures,’ Mr Tan said.

On the other hand, household incomes can fall sharply for a few reasons: job loss in a recession is the most common factor. Nevertheless, the rapid economic recovery has led to an improvement in the unemployment rate to 2.2 per cent as of March 2010, almost back to pre-crisis levels.

In February 2010, the government lowered the ceiling for home loans to 80 per cent of valuation – one of the steps that it took in trying to rein in the market.

‘We believe Singapore banks seldom extended loans of more than 80 per cent of valuation even before the loan ceiling was lowered,’ said the report.

‘Banks are beginning to price in higher risk premiums by raising home loan rates . . . The higher home loan rates will counterbalance the returns from property investments. This, in turn, helps reduce the likelihood of a speculative bubble and limit the risk of credit loss for banks.’

Last week, Standard & Poor’s affirmed its rating on the three Singapore banks, citing the lenders’ strong financial profiles and prudent management strategies.

S&P kept its long-term rating for DBS at AA-/Stable, United Overseas Bank (UOB) at A+/Stable, and OCBC Bank as A+/Stable.

The banks’ short-term ratings stand at DBS with A-1+, UOB with A-1, and OCBC with A-1.

Source: Business Times, 20 Jul 2010

In a report, S&P said its view is based on the reasonable level of housing affordability, sound borrower repayment ability and low loan-to-value ratios here.

Also it added that the Government’s measures to cool the market, and mortgage rates turning upward, all played a factor in its assessment.

Mortgages represent the single largest industry exposure for Singapore banks, at about 25 per cent of loan portfolios.

S&P noted that a high savings rate here and low household debt support borrower repayment ability when collateral values fall.

“Singapore households have strong balance sheets, underpinned by a high savings rate, low debt, and low unemployment,” the report said.

The ratings agency added that an unabated increase in property prices is unlikely, given the government’s past willingness to implement cooling measures. Amongst which is the move to lower the ceiling for home loans to 80 per cent of valuation.

“We believe the government will continue to monitor the property market and will implement further cooling measures if necessary,” S&P said.

Still, S&P believes Singapore banks seldom extended loans of more than 80 per cent of valuation even before the loan ceiling was lowered.

Source: Today, 20 Jul 2010

The house we own is easily a family’s biggest of big-ticket items, but only three out of 10 home loan customers here buy mortgage insurance.

While we believe we have insurance for nearly all of our needs, from children’s education to hospitalisation, some of us do not realise that our home loans need to be insured too.

Mortgage insurance offers decreasing coverage over the duration of your policy to align itself with your outstanding mortgage loan. Cover can also be extended to cover permanent disability, critical illness and unemployment.

Without a suitable mortgage cover or the means to pay up the mortgage if the breadwinner dies prematurely, the bereaved family stands to lose the roof over their heads should the bank repossesses the house.

Mr Dennis Ng, founder of mortgage consultancy portal Housing LoanSG.com, pointed out that although mortgage insurance is compulsory for an HDB flat owner who uses his Central Provident Fund Board savings, it is not a bank requirement for private home owners.

The good news is that DBS Bank and HSBC have started bundling mortgage insurance into some of their home loan packages.

DBS incorporates Aviva’s MyProtector Mortgage in some of its schemes, thereby protecting its customers in the event of death, total and permanent disability and critical illness.

Although the insurance does not come free, it saves home owners the hassle of looking for their own mortgage insurance.

Experts believe mortgage insurance is an important part of an overall financial plan.

‘This is because our home is most likely our biggest purchase and financial commitment in our lifetime. It is important to ensure that, in the event of unforeseen circumstances, our family members will not be burdened with the cost of outstanding home repayments, or worse, face the possibility of having to sell their home,’ said insurance firm Aviva Singapore’s chief executive Simon Newman.

This is something the Lee family realised when breadwinner Andrew Lee (not his real name) died from cancer in 2007, leaving an outstanding housing loan of nearly $300,000.

Fortunately, Mr Lee had bought a Manulife mortgage decreasing term plan in 1998 which mirrored his housing loan of $475,000 over a 29-year term. It covered death and total and permanent disability, with the reducing home loan spread out over 29 years. The annual premium was $988.

At the point of Mr Lee’s death, the insurance proceeds from his mortgage policy were about $397,000. His family received an initial $150,000 payout from Manulife in 2007. The rest was paid last year when the grant of probate was completed.

The family can pay off the housing loan in a lump sum or continue the mortgage instalments. In this case, there is a surplus of insurance proceeds over the outstanding loan which the family can use for their needs.

If there had been no policy, the family could have lost their home if they were unable to meet the loan repayments.

The policy Mr Lee bought is widely available from most insurers and contains a feature of reducing insurance cover over a period of time.

OCBC Bank’s vice-president of wealth management, Ms Anne Tay, said such a feature tries to mirror your outstanding mortgage loan.

‘You may start with a $500,000 mortgage on your home but as you make your monthly mortgage payments, your outstanding loan will reduce over the loan period. Accordingly, your mortgage liability will reduce too,’ says Ms Tay.

And by providing insurance cover on a reducing term basis, the premium will be relatively cheaper compared to a typical level term-life insurance policy.

Despite the importance of mortgage insurance, DBS Bank’s Mr Rick Vargo, managing director of bancassurance, said that only 25 per cent to 30 per cent of the bank’s home loan customers have such cover. This is consistent with the overall estimate provided by Mr Ng.

Mortgage insurance is not to be confused with fire insurance which the banks do require home loan customers to take up, and this may be provided free by the banks in the first year.

Tips on mortgage insurance

Home owners should understand their needs first when shopping around for a suitable mortgage cover. Here are some considerations.

1 The amount of cover

Aviva suggests that consumers should consider if they already have existing insurance plans that can cover the outstanding mortgage loan liabilities before buying mortgage insurance.

Some people may decide to buy mortgage insurance to cover a portion of the loan amount as they may have other insurance or other means to meet repayments if needed, said Mr Ng.

‘But if you do not have any other funding source, it is best to cover 100 per cent of the loan amount instead,’ he added.

Another consideration is whether you want to be covered for just death or to include total and permanent disability, terminal illness and critical illness as well.

2 Buy on a joint life basis

If you own a property jointly with another person, it is prudent to get mortgage insurance on a joint life basis so that it pays out the sum assured if either owner dies. Getting a separate insurance cover for each owner would result in a much higher premium, said Mr Ng.

3 Buy early

Ms Tay observed that there is a tendency for most people to procrastinate and buy mortgage insurance only when they are older. But the older you are, the higher the premium you have to pay.

For example, a 20-year $500,000 mortgage reducing term assurance plan will cost a male property owner aged 50 an annual premium of $2,305. The same policy will cost a 40-year-old male just $814 in annual premiums. The difference of $1,491 is the cost of a 10-year procrastination, she added.

4 Interest rate assumption

The sum assured and the time period of a mortgage reducing term assurance plan are usually matched to the mortgage loan amount and tenure. As the coverage is on a reducing basis, how fast or slowly the loan reduces over time is based on the assumed loan interest rate, which is decided at the inception of cover.

Mr Patrick Lim, associate director at financial advisory firm PromiseLand Independent, noted that some insurers may limit interest rates to a range of say, 3 per cent to 7 per cent, as in the case of Prudential Assurance’s PRUmortgage.

On the other hand, insurer TM Asia Life offers a wider range from 0 per cent to 9.75 per cent in even increments of 0.25 per cent.

‘It is important for consumers not to be restricted in their choice of a suitable interest rate,’ said Mr Lim.

Mr Ng suggests that policyholders assume 4 per cent so that the sum assured will be reduced at a slower pace than a lower interest rate. If the interest rate is assumed too low, there is a risk that the insurance proceeds might not be enough to pay off the outstanding loan.

5 Guaranteed premiums

It is worth checking if the annual premiums are guaranteed upon renewal, said Mr Lim. He noted that in the case of AIA’s mortgage reducing term assurance plan, the product summary states that the premiums are not guaranteed.

But this is not the norm as the premiums for the basic mortgage plan are usually priced to be non-reviewable and guaranteed.

6 Check the supplementary benefits

One area of concern is the cap on benefits such as total and permanent disability.

Mr Lim pointed out that permanent disability is capped at $2 million at AXA Life but $3 million at AIA.

Another consideration is when the benefits expire. For most insurers, the total and permanent disability benefit expires on the policyholder’s 65th birthday.

Aviva’s MyProtector Mortgage extends the benefit expiration to just before the 70th birthday. At Overseas Assurance Corp (OAC), it is the 66th birthday, said Mr Lim.

Also, check the definition of what constitutes total and permanent disability and whether the payout comes in a lump sum or as instalments spread out over a few years. Lump sums are better.

Both Mr Lim and Prudential Assurance’s director of product management, Mr Daniel Lum, recommend that consumers go for a mortgage cover that offers to waive the premiums if the insured is diagnosed with critical illness.

Other home-related insurance covers

Besides mortgage insurance, home owners should consider fire insurance that covers the building structures, and home contents insurance. The latter also covers personal belongings that are taken outside the home like hi-fi systems, said the General Insurance Association of Singapore.

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Don’t burden family members

‘Our home is most likely our biggest purchase and financial commitment in our lifetime. It is important to ensure that, in the event of unforeseen circumstances, our family members will not be burdened with the cost of outstanding home repayments, or worse, face the possibility of having to sell their home.’

MR SIMON NEWMAN, chief executive of insurance firm Aviva Singapore

Source: Sunday Times, 18 Jul 2010

# Prepare in advance

You must pay at least 1 per cent of the purchase price in exchange for an option to purchase. After that, you have 14 days to decide whether to proceed with the deal and pay the balance of 9 per cent for a completed property or 4 per cent for one under construction.

At this point, consult a mortgage specialist about financing. Mortgage documentation takes about 10 to 12 weeks to complete, so apply early.

Note that most banks charge a cancellation fee of up to 1.5 per cent on the loan amount if you pull out later.

Banks determine the maximum loan amount by applying a debt servicing ratio of between 30 and 35 per cent of your monthly income.

Therefore your total monthly repayment should not exceed this ratio when compared to your monthly income. Other commitments, such as a car loan, will be taken into consideration as part of your monthly commitments.

# Select your loan tenure

Generally, the maximum loan tenure is 35 years, but it depends on the borrower’s age. In the case of joint applicants, the maximum tenure will be based on the age of the youngest borrower as long as the loan tenure plus the age of the youngest borrower does not exceed 70 years on loan maturity.

For example, if a borrower wanted to select the maximum loan tenure of 35 years, he must not be more than 35 years old.

Here are some useful tips:

# Choose the right package according to your needs

Most banks offer three types of home loan packages: fixed-rate, variable-rate and market-pegged packages.

It is important to understand your needs and intentions before you decide which package suits you.

A fixed-rate package is suitable for those who want peace of mind as during the fixed-rate period, there will be no rate volatility.

But it is not recommended if you want to make a partial prepayment or full settlement during this period as there will be penalties.

A variable-rate package is one where the rate is pegged against the bank’s reference or board rate. This allows the borrower to make prepayments.

If you have a good understanding of market-pegged rates and you do not mind rate movements, go for the market-pegged package.

The rate offered by banks in Singapore is generally pegged to the Singapore Inter Bank Offer Rate (Sibor).

It also allows you to make loan prepayment without penalty for no lock-in packages on specific rollover dates.

# Get mortgage insurance for protection

Mortgage insurance – or Mortgage Reducing Term Assurance – covers the home loan balance in the event that the borrower dies or is totally and permanently disabled.

Although not compulsory, it is recommended. If an unfortunate event strikes, the loan repayments will be covered by the insurance.

Have difficulty in your repayments? Talk to your bankers. Late charges or non-repayment penalties are but a deterrent for non-payment. More importantly, promptly seek help in managing an overdue debt.

Banks try to help customers work through such difficult times. It might include allowing customers to pay only the interest portion of the loan for a short period, stretching the loan period so as to reduce the monthly repayment amount.

Help might also come in the form of allowing borrowers to include a second loan applicant to help service the initial loan.

It is not in the bank’s interest to foreclose on home loans. We advise customers who have loans to pay off and are close to running into the risk of not being able to make payments, to speak to their bank officers before their situation gets worse.

The writer is OCBC Bank’s head of secured lending.

Source: Sunday Times, 18 Jul 2010

(DUBAI) Syariah-compliant loans slumped to a five- year low in Europe, the Middle East and Africa in the first half on credit-ratings downgrades and falling property prices.

Islamic syndicated loans declined 40 per cent to US$2.2 billion, compared with a 5 per cent drop in total lending to US$304 billion, according to data compiled by Bloomberg. Real estate prices have dropped 50 per cent in the United Arab Emirates from their peak in August 2008, according to estimates from Colliers International.

‘Banks have plenty of liquidity but they have been very selective when it comes to where they would like to deploy it,’ Faisal Hijazi, business development manager of rating services and Islamic finance in Dubai at Moody’s Investors Service, said in a July 1 interview in Kuala Lumpur. ‘Real estate and investment companies seem to be the most seriously challenged when it comes to refinancing.’

Middle East property developers have been forced to renegotiate loans and bonds after they struggled to meet their obligations, prompting ratings companies to downgrade credit rankings and making borrowing more expensive. The last time banks made fewer Islamic loans was in 2005, when the total was US$75 million.

The UAE’s state-owned Dubai World, Saudi Arabia-based Saad Group and Investment Dar Co in Kuwait announced plans in the past year to restructure debt. Dubai Holding Commercial Operations Group, a real estate and hospitality company, had its rating cut to B2 on June 30 by Moody’s, five levels below investment grade.

Islamic finance transactions are based on the exchange of assets rather than interest to comply with the syariah principles.

Created in the 1970s, the industry’s assets may quadruple to US$2.8 trillion by 2015 from about US$700 billion in 2005, according to the Kuala Lumpur-based Islamic Financial Services Board, a standards-setting body.

Dubai Department of Finance’s sukuk, or Islamic bonds, have dropped since the debt was sold in October. The 6.396 per cent note maturing in November 2014 yielded 7.82 per cent, 145 basis points more than 6.37 per cent at the time of issue, according to Bloomberg bond trader composite prices. The rate reached a record high of 10.29 per cent on Feb 15. The securities’ spread over similar- maturity US Treasuries narrowed 187 to 624 in the same period.

The HSBC/Nasdaq Dubai US Dollar Sukuk Index, made up of sukuk from Indonesia to Saudi Arabia, gained 0.8 per cent in the three months ended June 30. The average yield on corporate and government sukuk dropped seven basis points, or 0.07 percentage point, to 6.29 per cent last quarter, according to the HSBC/Nasdaq Dollar Sukuk Index.

The yield on Malaysia’s 3.928 per cent Islamic notes due June 2015 fell one basis point last week to 3.57 per cent, according to prices from Royal Bank of Scotland Group.

Dubai companies may have to restructure loans due over the next 12 to 18 months, Moody’s said in a report on June 14. Arab companies in the Persian Gulf region have US$28 billion of debt maturing in 2012, Moody’s said.

The loan of Qatari Diar Real Estate Development Co, a unit of the Gulf state’s sovereign wealth fund, was one of four Islamic loans in Europe, Middle East and Africa so far this year, the data show. It borrowed US$300 million in April from banks led by HSBC Holdings plc, Europe’s biggest lender by market value, Bloomberg data show.

In Asia, the Malaysian government’s plan to spend RM230 billion (S$99.3 billion) on development projects from 2011 to 2015 may boost demand for financing, according to rating company RAM Holdings Bhd. Bank loans in Malaysia more than doubled to US$4.1 billion in the first half, the highest in two years, after the country climbed out of its first recession in a decade last year.

Malaysia’s economy is forecast by Prime Minister Najib Razak to expand as much as 6 per cent this year after shrinking 1.7 per cent in 2009.

Maybank Islamic Bhd, a unit of Malaysia’s largest lender Malayan Banking Bhd, expects to increase Islamic loans by 20 per cent to 30 per cent for the financial year ending June 2011, chief executive officer Ibrahim Hassan said in a message to Bloomberg on July 1.

Dubai World, whose unit Nakheel is building palm-shaped islands off Dubai’s coast, reached an agreement with its main creditor group in May to restructure US$23.5 billion of liabilities.

Saad Trading, Contracting and Financial Services Co, a unit of Saad Group owned by billionaire Maan al-Sanea and his family, defaulted on a US$650 million sukuk in November. Investment Dar, the Kuwait- based owner of half of Aston Martin Lagonda Ltd, was unable to meet obligations on its outstanding US$30 million debt in April last year, according to data compiled by Bloomberg.

The company and its creditors agreed to most commercial aspects of restructuring liabilities, the creditors committee said on June 14. It had 1.03 billion dinars (S$4.9 billion) of debt outstanding at the end of September 2008.

‘The quality of the creditors has deteriorated,’ Mr Hijazi of Moody’s said during an Islamic capital market forum in Kuala Lumpur. ‘So the uncertainty is still pretty much there.’ – Bloomberg

Source: Business Times, 6 Jul 2010

INTEREST rates are falling but could they end up close to zero?

That was the startling situation posited in an analyst report last week – good news for mortgage holders but painful for those looking for some return on their bank deposits.

Thankfully, economists polled by The Straits Times say that the spectre of zero interest rates – seen most recently in Japan – is unlikely to occur in Singapore. But they warn rates will probably fall further this year to skirt the absolute baseline, before rising a little by year end.

The trend here is in stark contrast to the rest of Asia and Australia, where central banks are lifting rates, sometimes aggressively, to fight inflation.

Rates started falling here after the Monetary Authority of Singapore (MAS) decided last month to let the Singapore dollar rise against a basket of currencies.

The MAS had been intervening in the currency market up to that point to hold rates at the same level, and at the same time keep the Singdollar within its trading band.

Mr David Carbon, managing director for economic and currency research at DBS, has estimated that the MAS intervened to the tune of US$63 billion (S$86.9 billion), but it has now allowed the currency to appreciate and interest rates to adjust back to their actual levels.

The money market response to all this has been dramatic.

After hovering at 0.65 per cent for the past 14 months, the benchmark three-month Singapore Interbank Offer Rate (Sibor) fell 13 basis points to a new low of 0.52 per cent two weeks ago, before edging up slightly to 0.53 per cent. Sibor is the rate at which banks lend to each other and serves as a handy benchmark for all kinds of rates here, particularly mortgages.

Banks reacted to the falling Sibor by offering savings rates of a measly 0.1 to 0.2 per cent. Fixed deposits are marginally better at 0.4 to 0.6 per cent for a period of one to two years.

So a deposit of $10,000 for two years could earn you an annual interest of about $60: a few pizzas and a beer.

With such pitiful returns, investors have been looking elsewhere to put their cash. But mortgage holders are cheering as the falling Sibor means loans pinned to it have fallen as well, although some banks have raised the fixed amount that is added on to the base rate.

Others stuck in long-term mortgages are also looking to refinance for better rates, say financial planners.

‘Sibor can’t go to zero but it can take another step or two in that direction and seems likely to do so,’ says Mr Carbon, who forecasts Sibor to bottom out at 0.43 per cent by the end of next month, and to start rising slowly to 0.61 per cent by the end of the year.

Economic issues unfolding across the globe, particularly in the United States, and the way Singapore responds mean low rates will continue for a while.

Unlike most other countries, Singapore’s high dependence on exports and imports means the MAS controls monetary policy through its exchange rates. During high inflation, a stronger currency helps to make imports cheaper and so eases pressure from imported inflation.

Singapore’s policy also means it tracks the interest rate policy of its major trading partners, including the US where rates are at rock bottom – between zero and 0.25 per cent.

So rates here ‘are likely to remain depressed as long as US rates are low’, wrote economists at Standard Chartered in a report on April 29. They expect Sibor to drop further to 0.5 per cent by the end of the second quarter and stay there for the rest of the year.

The huge Europe bailout package and continued scepticism over that region’s ability to grow amid a burgeoning deficit has some analysts believing rate hikes in Asia may have to be delayed. But it may not derail a rise in the Federal Reserve’s rates as economic indicators continue to point to an improving situation in the US.

That is prompting economists to tip Sibor to recover near the end of the year.

Barclays Capital economist Leong Wai Ho believes it will rise a little to 0.6 per cent by then, while OCBC economist Selena Ling sees rates rising to 0.8 per cent.

Financial advisers suggest savers could invest in mutual funds and unit trusts that are relatively low risk and have given higher returns of 2 to 3 per cent.

More sophisticated investors might try short-term bond funds, said Fundsupermart general manager Wong Sui Jau. While bonds can be seen as risky, he noted that only once in the past eight years – 2008 – did bond funds produce negative returns: ‘Generally they are not volatile and are relatively low risk.’

Investors willing to take even more risk could try funds investing in Asia and emerging markets bonds.

‘Currency appreciation in those countries is likely to be on a par with the Singdollar appreciation and would give a decent amount of yield,’ Mr Wong said.

Source: Straits Times, 13 May 2010

BANKS

Effective interest rates for personal loan: 12 per cent to 25 per cent per annum depending on income and loan tenure

Interest rates for housing loan: from 1.6 per cent per annum depending on loan tenure and type of loan

Minimum income: $20,000 per annum

Maximum amount that can be borrowed: up to four times the borrower’s monthly income

UNIONS

Interest rates for personal loans: 4.25 per cent to 6 per cent per annum

Minimum income: no minimum income but must be member of union

Maximum amount that can be borrowed: two to eight times borrower’s monthly salary or up to the value of the pledged collateral

LEGAL MONEYLENDERS

Interest rates for personal loans: 3.33 per cent per week to 20 per cent per month

Interest rate for housing loans: 4 per cent to 20 per cent per month, depending on the loan amount, repayment period and borrower’s income

Minimum income: $1,000 a month

Maximum amount that can be borrowed: up to four times the borrower’s monthly income

ILLEGAL MONEYLENDERS or LOAN SHARKS

Interest rates: Usually a flat 20 per cent per month, regardless of the type of loan

Minimum income: None. You need a guarantor who will pay up if you default.

Maximum amount that can be borrowed: Depends on how much you are trusted. Amounts start as small as $500 and can go up to thousands of dollars.

Source: Sunday Times, 9 May 2010

The HDB has received more than 4,000 applications for second concessionary loan.

So far, about 1,800 applicants were successful.

About a quarter of applications were rejected, while the rest are still being processed.

Previously, only households that are upgrading to a bigger flat type are eligible to apply for a second concessionary loan from HDB.

Source: Channel News Asia,7 May 2010