Buying a property is one of the biggest financial commitments you will likely ever make, and a key part of that process is choosing a property loan to finance your purchase. The interest rates of most floating rate property loans today are pegged to either the Singapore Dollar Swap Offer Rate (SOR), the Singapore Interbank Offered Rate (SIBOR) or a bank’s board rate.
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However, Singapore is in the midst of moving towards a different interest rate benchmark, the Singapore Overnight Rate Average (SORA). This is because SOR and SIBOR will soon be discontinued in line with global benchmark reforms.
SOR will be discontinued after Jun 30, 2023; the six-month SIBOR will be discontinued after Mar 31, 2022; and the more widely used one-month and three-month SIBOR after Dec 31, 2024. Following the transition, SORA will be the key interest rate benchmark for the Singapore Dollar (SGD) financial markets.
In preparation for these developments, banks have stopped issuing new SOR-linked loans from May 2021, and have recently stopped issuing new SIBOR-linked loans. Existing loans that are linked to SOR and SIBOR will also need to be converted to alternative packages over the next three years.
SORA is replacing SOR and SIBOR as the SGD interest rate benchmark for use in financial contracts such as loans, bonds and derivatives. Published daily by the Monetary Authority of Singapore (MAS), SORA is a robust and reliable interest rate benchmark that is fully backed by overnight interbank cash transactions in Singapore.
This change will affect property owners who are considering or already have a floating rate property loan package. Here are some answers to the key questions you may have