Why SORA Is The New SIBOR And Why It’s Better Than SIBOR

Homeowners, listen up. There’s a new benchmark interest rate in town and you need to hear about it. That’s because the Monetary Authority of Singapore (MAS) is pushing for SORA (the new benchmark interest rate) to take over as the main interest rate benchmark in Singapore by September.

For the uninitiated, here’s what you need to know about SORA and why it’s the MAS’ preferred interest rate benchmark.

What Is SORA?

SORA, or Singapore Overnight Rate Average, is the latest benchmark interest rate that will be replacing the widely used Singapore Interbank Offered Rates (SIBOR). It was introduced and recommended by the MAS in 2019 as the most suitable and robust interest rate benchmark for Singapore’s financial market.

How Is SORA Calculated?

The calculation for SORA is based on a volume-weighted average rate of borrowing transactions on the unsecured overnight interbank SGD cash market. In short, it means that SORA will be taking the average interest rate of all the unsecured lending that banks in Singapore have lent to its other banking counterparts.

Each transaction needs to fulfill the following criteria:

  • Unsecured overnight interbank SGD borrowing transaction that is at least $1m
  • Booked under the central-booking arrangements approved by MAS
  • Traded with any Singapore-based bank, including foreign bank branches based in Singapore

How Is SORA Different From SIBOR?

SIBOR is a forward looking interest rate benchmark. The way that SIBOR is calculated is that MAS will ask contributing banks to contribute the rate that they would charge for unsecured overnight interbank SGD borrowings on each business day. The contributed rates will then be ranked from top to bottom with quartiles removed. The remaining contributed rates will then be averaged to give rise to the industry-level SIBOR rate.

Unlike SIBOR, SORA is a backward looking interest rate benchmark. It only takes into account the unsecured overnight interbank transactions that have taken place. This not only makes it more transparent, but it also offers greater stability compared to SIBOR.

Why It Benefits Homeowners To Switch To SORA Now?

Though all homeowners will eventually have to switch to SORA, we recommend homeowners to make the switch as soon as possible. Here’s why.

  1. SORA Is More Predictable For Homeowners

Like SIBOR, SORA also has 1-month, 3-month and 6-month rates. The 1-month compounded SORA rate means that it takes all the unsecured overnight interbank transactions in the past 1 month into account when calculating the SORA rate. This makes it much more stable, which translates to predictability for homeowners.

With SORA, you won’t see your monthly mortgage interest rate suddenly shooting up from month to month.

  1. SORA Is More Transparent Than SIBOR

Since SORA is calculated from actual unsecured overnight interbank transactions that have taken place, it is not guesswork. These interbank transactions have indeed been disbursed at the rate that was published by the bank.

How To Make The Switch To SORA?

Back in 2020, OCBC was the first bank to launch the SORA-pegged home loan in Singapore. However, the other banks have now caught up and are now offering their own SORA-pegged home loan.

Here is a quick summary of the SORA-pegged home loans on offer as of 10th May 2021:

Bank Package Interest Rate Lock-In
UOB 3-Month Compounded SORA Home Loan Package Year 1, 2: 3M Compounded SORA + 1.25% p.a.

Thereafter: 3M Compounded SORA + 1.40% p.a.

OCBC 1M Compounded SORA Home Loan Package Year 1: 1M Compounded SORA + 1.20%

Year 2: 1M Compounded SORA + 1.30%

Year 3: 1M Compounded SORA + 1.40%

Thereafter: 1M Compounded SORA + 1.40% p.a.

OCBC Eco-Care Home Loan

(if your home is verified to be energy efficient based on the Tropical Home Energy Efficiency Assessment (THEEA) by BCA)

Year 1, 2: 1M Compounded SORA + 0.98% p.a.

Thereafter: 1M Compounded SORA + 1.40% p.a.

(Promotional rate)

DBS 3M SORA Home Loan Package Year 1, 2: 3M Compounded SORA + 0.8% p.a.

Thereafter: 3M Compounded SORA + 1.00% p.a.


Is your home loan suitable for conversion into a SORA-pegged home loan? Contact us today and let our mortgage experts at Moneyline.sg help you analyse how much savings you can get if you convert into a SORA-pegged home loan.


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