Here’s a better barometer to NPL than interest rates

It’s a more sensitive indicator to non-performing loans.

NPLs have been the darling of Singapore banks’ results in 2015, with absolute NPLs rising by 15% this 9M15, following the trend of credit costs.

However, while interest rates have been an effective indicator for NPL trends, DBS says unemployment rates have a stronger correlation than interest rates.

DBS adds that as long as one remains gainfully employed, installments should continue to get paid.

“There have been concerns that as SIBOR rises, mortgage installments get costlier and there could be stress on repayments. We believe that most home owners should still be able to shoulder the burden of higher rates as banks have ensured that borrowers can still service their home loans if interest rates rise to 3.5% as per Monetary Authority of Singapore (MAS) requirements,” DBS said.