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SORA Interest Rates and Home Loans Guide (2022)

PropertyGuru Editorial Team
SORA Interest Rates and Home Loans Guide (2022)
Starting the house buying process can be an intimidating one, especially if you’re unfamiliar with home loan acronyms like Singapore Overnight Rate Average (SORA), Singapore Interbank Offered Rate (SIBOR) and Singapore Swap Offer Rate (SOR). But hey, no worries. If you’re looking to familiarise yourself with these mortgage terms, you’re at the right place!
Here’s a helpful article to help you get acquainted first:
Already have an idea of what those interest rates are? Then let’s deep-dive into the most relevant of the three, SORA.

SORA: The New Recommended Benchmark

In a nutshell, SORA, SIBOR and SOR represent three of Singapore’s industry-wide benchmark interest rates used to determine the floating interest rates of bank loans. Here’s the good news, though: chances are, you’ll only need to think about SORA (Singapore Overnight Rate Average) bank loans, in the coming future.
In line with the phasing out of the scandal-tainted London Interbank Offered Rate (LIBOR), Singapore is phasing out SIBOR and SOR to ensure greater trust within the industry. Phasing out SIBOR and SOR by 2024 and 2021 respectively, SORA will be the new standard benchmark interest rate used from 2022 onward.
So for home buyers (you!) looking to take up a floating rate bank loan, you’ll get your pick of various SORA (and possibly SIBOR) floating rate packages to finance your home.

What Is SORA?

SORA reflects the volume-weighted average rate of borrowing transactions in Singapore’s unsecured overnight interbank SGD cash market between 8am and 6.15pm. This rate is published on the Monetary Authority of Singapore’s website at 9am the next day, and it is this rate that will be the basis of your bank loan’s interest rates.
The great thing about SORA is since SORA is backward-looking rather than forward-looking, it is considered to be much more accurate and stable compared to SIBOR. This is because SORA is based on overnight transactions that happened the day before, whereas SIBOR takes the average of a few banks, ignoring the lower and higher percentile/values.
Plus, SORA does not depend on international interest rates (unlike SIBOR). This makes any changes to SORA’s interest rates much more gradual and less volatile.

How SORA Affects Your Home Loan Interest Rates

If you’re buying a house, you’ll be choosing between several home loan packages – including floating rate packages. This means your choices will include SORA home loan packages, where your loan’s interest rates are pegged to SORA.

1M SORA vs 3M SORA

If you opt for the floating rate SORA packages, you’ll get to choose between 1-month compounded (1M SORA) and 3-month compounded (3M SORA) SORA loan payments. The difference between the two packages? You’re choosing how often your loan interest rates are ‘’refreshed’’.
For a 1M SORA home loan package, your interest rates will be renewed every month depending on SORA rates compounded within a month. The same goes for a 3M package, but for every three months. So depending on whether you’re getting a 1M SORA or 3M SORA, your interest payments will fluctuate monthly or quarterly.

SORA Home Loans in Singapore

Banks that have SORA home loans include DBS, Citibank, OCBC, UOB, Maybank, HSBC, Standard Chartered Bank, and RHB Singapore*. Check out all the SORA home loans each bank has to offer below:
Banks with SORA home loansSORA interest rates and mortgages
DBS 2-Year Lock-in 3M SORA + 1.00% p.a.
OCBC OCBC 1M Compounded SORA Home Loan
UOB 3-Month Compounded SORA Home Loan package, and Combination of fixed-rate and 3-Month Compounded SORA
Maybank Maybank 1M Compounded SORA, and Maybank 3M Compounded SORA
HSBC HSBC 1M Compounded SORA Home Loan
CitiBank CitiGold 1M/3M SORA BUC Package (min. $800,000), CitiGold 1M/3M SORA BUC Package (min. $750,000), CitiBank 1M/3M SORA Package (min. $800,000), and CitiBank 1M/3M SORA Package (min. $750,000)
Standard Chartered Bank 3M Compounded SORA Promotional Pricing Package
RHB RHB 3M SORA Package
*Accurate at the time of writing, on 17 August 2022. For the latest rates, please refer to PropertyGuru Finance.

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Should You Get a SORA Home Loan?

When faced with the choice between a SORA Home Loan and a fixed rate home loan though, which should you choose? The short answer: it depends on the current market outlook and your specific financial situation.

Floating-Rate Housing Loans: Greater Saving Opportunities

One thing to consider before opting for floating-rate house loans like SORA is the greater saving opportunities! As interest rates change, there may be periods where interest rates fall (eg. during a recession) rather than stay at high, fixed-rates. Opting for a floating-rate house loan would give you an advantage should interest rates fall.
However, with that being said, taking a chance on floating-rate housing loans also means you will need to be aware of market uncertainties before taking the leap. The changing nature of monthly interest rates may only benefit those who have a good risk appetite.
If you’re looking for a housing loan at the moment though (2022), here’s a little information on the current housing market that might help you out! To curb the rising inflation, interest rates in Singapore have been on the rise to encourage consumers to spend less. This means mortgage rates (both fixed and floating interest rates) are also on the rise and are expected to continue rising.
As of 30 June 2022, 3M SORA hit 0.757%, way higher than the 0.2% in February 2022. Since floating rates for home loan packages are typically pegged against the 1M or 3M SORA, if 3M SORA interest rates double by the end of 2022, future house buyers can expect their SORA housing loans to hit about 2.5% this year. With interest rates increasing, your floating-rate house loan interest rates might be much higher than those who opted for fixed-rate housing loans.

2. Bank Loan vs HDB Loan Downpayments

hdb-loans-vs-bank-loans
Whether a SORA home loan best suits you also depends on your specific financial situation. Bank loan down payments requires you to pay 25% of your total housing cost as a down payment, with a minimum of 5% of your down payment paid in cash (assuming 75% LTV).
However, HDB Loans only require your down payment to make up 15% of your total housing cost. The 15% can also be paid fully with your CPF’s Ordinary Account (assuming 85% LTV). This means that for home buyers who don’t have enough cash on hand, HDB’s loans might be much more suitable. This applies especially to younger couples who may be just starting out in their careers.
However, if you already have cash on hand and are ready to pay for your house without too many crutches, bank loans like SORA allow for greater financial flexibility in the future. The 25% down payment means lesser loans in total. It also means you get to enjoy fluctuating interest rates (beneficial for you if interest rates fall)!

SORA Home Loans: Are They for Everyone?

Depending on the market outlook and your personal financial situation, SORA Home Loans might just be for you. If you’re considering financing your house with a SORA home loan, be sure to keep track of market conditions and interest rate projections – that way you’ll be better able to make an informed decision on what type of home loan suits your purchase best.
Ultimately, if you’re uncertain, remember that you can always turn to PropertyGuru Finance mortgage experts! Just contact us here and we’ll be happy to help you out. Our brokers are experts in everything to do with the property – including housing loans and interest rates.
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Disclaimer: Information provided on this website is general in nature and does not constitute financial advice.
PropertyGuru will endeavour to update the website as needed. However, information can change without notice and we do not guarantee the accuracy of the information on the website, including information provided by third parties, at any particular time. Whilst every effort has been made to ensure that the information provided is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult a financial planner or your bank to take into account your particular financial situation and individual needs. PropertyGuru does not give any warranty as to the accuracy, reliability or completeness of information which is contained on this website. Except insofar as any liability under statute cannot be excluded, PropertyGuru and its employees do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person.

    More FAQs About SORA

    The Singapore Overnight Rate Average (SORA) is the volume-weighted average rate of unsecured overnight interbank SGD transactions brokered in Singapore, between 8am to 6.15pm.

    On every business day, each of the 20 banks that form the panel of the Association of Banks in Singapore (ABS) submit a rate at which they think they could borrow funds on the interbank market. After removing the top and bottom quartiles, SIBOR is then set as the average of the remaining submissions.

    You will be able to track the daily SORA rate on the MAS site and SIBOR rate on the ABS site. You may check the 1M, 3M, 6M and even 12M values for any stipulated period.

    A 3M SORA rate is a rate that is adjusted every three months. 1M, 6M and 12M SORA rates are adjusted every month, six months and 12 months respectively.