Here's why the MAS isn't worried about the SIBOR spike

It keeps property prices in check.

Rising interest rates may sound intimidating to individual investors, but there's a reason why the Monetary Authority of Singapore (MAS) is still quite happy with the SIBOR spike.

According to Macquarie, the MAS welcomes this development as it raises mortgage interest rates and squeezes foreign banks and other borrowers who had binged on debt while interest rates were low.

The higher SIBOR will keep property prices in check and stem the surge in Singapore's loan to deposit ratio, which has jumped from 70% in early 2011 to nearly 97% at present.

"There are two reasons why the MAS is quite happy with slightly higher SIBOR: first, it raises mortgage interest rates; and second it squeezes (mainly foreign) banks (and other borrowers) who had over-leveraged during the period of low interest rates. The higher deposit and lending rates are likely to slow loan growth while boosting deposits – and also be positive for banks with large CASA pools that are net-lenders in the inter-bank market," stated Macquarie.

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