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08 July 2022

SOURCE: MoneySense

young asian couple getting keys for their new home

If you have a floating rate property loan, you’ll need to know that SORA will be replacing the Singapore Dollar Swap Offer Rate (SOR) and Singapore Interbank Offered Rate (SIBOR) property loans, as the key interest rate benchmark for Singapore Dollar loans and other financial products.


If you are looking to take up a new property loan, a floating rate package based on SORA will be available among the banks' loan packages.

What is SOR, SIBOR and SORA?

SOR is the effective rate of borrowing Singapore dollars synthetically, by borrowing US dollars and converting them to Singapore dollars in the foreign exchange market.


SIBOR is what a bank estimates it will have to pay another bank to borrow Singapore dollars.  It is calculated based on daily submissions by a panel of contributor banks and may not be always fully backed by transactions.


SORA, which has been administered by MAS since 2005, is the volume-weighted average borrowing rate in Singapore's unsecured overnight interbank cash market.


Unlike SIBOR, which is based on estimates from Singapore banks, SORA is based on transaction data and is published on the Monetary Authority of Singapore website at 9am daily.


SORA loan packages are priced using the compounded average of the daily SORA rate over one, three, or six months. Because the calculation is based on an average over a period, interest rates tend to be less volatile.


In contrast, interest payments on SIBOR-based and SOR-based loans are determined by the prevailing rate on a single day and could change abruptly in the event of interest rate fluctuations on interest reset dates.


The impending discontinuation of SOR and SIBOR is in line with a shift in financial markets worldwide towards interest rate benchmarks that are computed based on transaction data. For instance, SOR which relies on USD LIBOR in its computation, has been discontinued on 30 June 2022, alongside the discontinuation of USD LIBOR.


SOR and SIBOR will eventually be replaced by SORA.

What to expect for SOR borrowers

Option 1: Take up the SORA Conversion Package

Your bank will switch your SOR loan to a SORA loan by applying a standardised Adjustment Spread (Retail) on your original loan margin. An adjustment spread is necessary to account for term and credit risks, which SOR factors in but SORA does not – this is why SORA is typically lower than SOR. 


The Adjustment Spread (Retail) is computed based on the average difference between SOR and 3-month SORA compounded-in-advance over the last three months, subject to a floor of zero.


You will incur no additional fee or lock-in if you switch to the SORA Conversion Package offered by your existing bank. 



Before (SOR loan)

After (SORA Conversion Package)

Reference Rate 

1-month SOR, 3-month SOR, or 6-month SOR

3-month Compounded SORA

Loan Margin

Your existing SOR loan margin

Your existing SOR loan margin + relevant Adjustment Spread (Retail)

Option 2: Change to any other loan package currently offered by your bank

Loans include the fixed rate property loan, floating rate property loan based on bank's board rate or fixed deposit rates.


Make sure to contact your bank early to consider your options, and to avoid any disruptions to your loan when SOR ceases.

What to expect for SIBOR borrowers

For borrowers on loans that reference the 6-month SIBOR (Singapore Interbank Offered Rate), you should have been contacted by your bank regarding the available options. Otherwise, you should contact your bank immediately as the 6-month SIBOR has been discontinued since 31 March 2022.


For borrowers on loans that reference 1-month or 3-month SIBOR, details of your loan conversion will be released in due course, as these benchmarks will only be discontinued after 31 December 2024. 


To facilitate industry-wide transition, the Mortgage Servicing Ratio (MSR) and Total Debt Servicing Ratio (TDSR) will not need to be re-computed for affected borrowers switching to a SORA package with the same financial institution.


If you initiate a refinancing of your property loan with another financial institution (which will be subject to the financial institution's terms and conditions), you should check if any other TDSR exemptions apply. For example, borrowers who are owner-occupiers are exempted from TDSR when refinancing their property loans.

Key dates to note

31 March 2022 - 6-month SIBOR will be discontinued

30 June 2023 - SOR will be discontinued

31 Dec 2024 - 1-month and 3-month SIBOR will be discontinued

Learn more about buying a property on MoneySense, Singapore’s national financial education programme!


Article was first published on MoneySense on 19 Nov 2021.


Information accurate as of the date of publication.