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SORA vs SIBOR vs SOR: What Do These Rates Mean for Your Home Loans?

PropertyGuru Editorial Team
SORA vs SIBOR vs SOR: What Do These Rates Mean for Your Home Loans?
What is SORA? How about SIBOR, or SOR?
Put simply, SORA, SIBOR and SOR are reference rates used in home loans in Singapore. Scan through any home loan offerings and you’ll likely come across packages that look something like "3M SORA + 0.75%". The first part of the ‘equation’ refers to the one, three, or six-month (1M, 3M, 6M) compounding period, the second part is the reference rate (SORA, SIBOR, SOR), and the last part is the bank’s spread (+xx%). These are floating-rate home loans – more on how they work here.
With the global interest rates rising – inflationary pressures have prompted multiple interest rate hikes this year alone – these reference rates are also on an upward trend. An increase in the SORA/SIBOR/SOR component would also, in turn, increase your monthly mortgage payment. Consider that in the context of an average home loan tenure of 30 years – it can add up to tens or even hundreds of thousands of dollars! Hence, it’s important to understand these rates and their trends.
In this article, we will explain the following about SIBOR, SORA and SOR rates:

SORA vs SIBOR vs SOR (An Overview)

SORA, SIBOR, and SOR are reference rates. They are used to determine the final interest cost on floating rate loans. They serve as a gauge for a bank’s cost of funds, so for banks to be profitable, they must charge a spread (the +xx% component) on top of that.
Reference rateHow it’s calculated
SORA rate (Singapore Overnight Rate Average)The volume-weighted average rate of unsecured overnight interbank SGD transactions brokered in Singapore. Volume-weighted average rate of transactions reported by brokers in Singapore to Monetary Authority of Singapore (MAS).
SIBOR rate (Singapore Interbank Offered Rate)The rate that Singaporean banks can borrow money from each other via the interbank market.
SOR rate (Swap Offer Rate)Effective rate of borrowing SGD synthetically. The cost of borrowing SGD if you had done so by first borrowing USD and then swapping it to SGD using a foreign exchange derivative. Volume-weighted average rate of USD/SGD FX swap transactions, with USD LIBOR as an input.

What Is SORA?

SORA is the volume-weighted average rate of unsecured overnight interbank SGD transactions brokered in Singapore. According to ABS, the transaction-based benchmark is commonly monitored as a reflection of daily conditions in SGD money markets and is underpinned by a deep and liquid overnight funding market, making it a suitable alternative to SOR.
Other benefits of SORA include the fact that it has been published by MAS since 1 July 2005, which means there is a long historical time series that market participants can analyse and use to model trends for risk management, asset-liability pricing and trading purposes.
Additionally, compounded SORA rates are backward-looking overnight rates, which are considered more stable compared to forward-looking term rates like SOR (and in fact, SIBOR). Though SORA is relatively new, most banks have already launched their SORA-pegged home loans and are phasing out their SIBOR-pegged home loans.

What Is SIBOR?

SIBOR stands for the Singapore Interbank Offered Rate, and it is the rate which Singaporean banks can borrow money from each other via the interbank market. There are four SIBOR tenures: one, three, six, and 12 months.
The global banking system follows a fractional reserve model, meaning banks don’t actually have 100% of the deposits you and I put in them on hand. Most of it is already lent out as loans. So, when banks face liquidity (immediate cash) shortages – for instance, the amount of loans they must disburse that day exceeds their cash – they borrow from other banks. SIBOR is the rate at which Singaporean banks can do so.
Each 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 can track the daily rate on the ABS site here.

What Is SOR?

SOR stands for the Swap Offer Rate, and explaining it is a little more complex. But to keep it simple, it is the cost of borrowing SGD if you had done so by first borrowing USD and then swapping it to SGD using a foreign exchange derivative. It is also calculated by the ABS.
Unlike SIBOR, however, for the purposes of assessing home loans, you can pretty much ignore it. While SOR was once also a popular reference rate, it has been completely phased out. Because of the USD component in its calculation, it is far more volatile compared to SIBOR – not an ideal trait for a reference rate.

SORA Rate to Replace SIBOR Rate by 2024

If you don’t know already, SIBOR and SOR rates are being phased out and replaced by SORA.
The last SOR-pegged home loan was taken off the market in July 2017 and on 31 October 2022, all SOR-pegged property loans have been converted to alternative packages. This transition is necessary as the USD LIBOR, which SOR relies on, will be discontinued by end-2021.

Should You Choose a SORA-Pegged Home Loan?

There are two components to this question. Firstly, should you choose fixed-rate or floating-rate home loans, and secondly, should you choose a SORA-pegged loan over other floating rate loans?
Let’s address the first question first.

Fixed vs Floating-Rate Home Loans

Ultimately, there is no right or wrong answer to this question. The two are completely different, but not one is better than the other.
In a fixed-rate loan, you lock in your interest rate for a stipulated period, usually two to five years. This means if interest rates rise, you will benefit as you will still pay the lower rate. But if interest rates fall, you will lose out since you could have paid the lower rate.
In a floating rate loan, it is the other way round whereby your your mortgage rate moves in line with a benchmark or reference rate (like SORA or SIBOR). If interest rates go up, your mortgage gets more expensive. If rates fall, you pay less too.
Which is ‘better’ would depend on your personal preferences and expectations of the market. If you are more risk averse and think that interest rates will rise, then you may want to pay a premium to go for the more stable fixed rates. If you have a larger risk appetite and want to capitalise on lower rates now, you may want to pick floating rates.

SORA Rate Trend

For reference, this is the current SORA trend.
Source: Data from MAS, featuring 1M, 3M and 6M SORA values from 3 January to 29 July 2022.
As you can see there were two rate hikes in 2022 thus far. In May, the US Feds hiked rates by 0.5 percentage points. Then, in July, it went up by another 0.75.
Industry experts forecast the final rate hike of the year to take place in September, which means local mortgage rates could go up soon. However, no one can be certain how long these high rates will last for – especially with an impending global recession. Typically, interest rates are slashed at the start of a recession.
With that, should you consider a SORA-pegged home loan?
Banks have been slowly discontinuing their SIBOR-pegged home loans, and introducing SORA-pegged home loans since the start of the year. If you compare the most competitive mortgage rates on PropertyGuru Finance, you’ll notice that – despite the rate hikes – a lot of the cheaper packages (with the lowest interest rates) are actually SORA packages.
SORA home loan example

Key Considerations When Choosing A SORA Home Loan

There are a few considerations when deciding whether or not to take up a SORA-pegged home loan. Firstly, although they currently offer some of the lowest interest rates in town, they are subject to market movements and may go up, making your monthly installments more expensive. In this case, you must ensure you’ll still be able to afford your repayments.
Its floating nature means that your interest rate can be quite volatile, depending on the market, which means it’s definitely more suited for those with a larger risk appetite. If you prefer predictable monthly mortgage repayments, then this may not be suitable for you.
That said, when compared to previous benchmarks like SIBOR, SORA is actually considered quite stable. That’s because SORA uses transactions that have already taken place, as opposed to SIBOR which uses future rates. This enhances predictability and reduces volatility, which is great for borrowers.

SORA-Pegged Loans vs Other Floating-Rate Home Loans

Fixed rate loans aside, if you have decided upon a floating rate mortgage, then SORA is a very transparent option. No one bank can influence the rate. Second, because the spread each bank charges over SIBOR is clear to see, it is easy to compare home loans against one another.
The alternatives are board (interest rate fixed internally by a bank) and fixed deposit (FD) rates. The former has zero transparency as they are solely at the bank’s discretion, while FD rates vary by bank, making an apple-to-apple comparison more difficult.
That said, it is worthy to note that most banks have a floor rate that protects them in case the benchmark interest rate (SORA, in this case) falls too low. How this works is that if SORA fell below that minimum rate, your final interest rate would be based on that minimum rate plus the bank’s spread (instead of SORA plus the spread).

Get the Best Home Loan Rates on PropertyGuru Finance

Financing is a major part of purchasing property, whether for investment or own-stay purposes.
At PropertyGuru Finance, we partner with all the major banks in Singapore to give you access to the best rates possible—whether SORA-pegged or otherwise—and limited-time bank promotions.
If you prefer to research independently first, you may read our informative guides on home financing.
If you’re looking for a home loan, we recommend you speak with one of our mortgage experts for in-depth and unbiased advice to help you navigate the market.
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More FAQs About SIBOR, SOR and 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. 

If you can afford it (meaning more cash on hand), you should definitely consider a bank loan as the interest accumulated may be lower. Check out PropertyGuru Finance to learn how you can refinance your HDB loan to a bank loan.