Good Day everyone,

Having read the information provided earlier on HDB Loan Structures, I am now here again to share some further information on the Housing Loan rates, Hope that these information will be beneficial to all.

Over the past few years, as consumers demand for more transparency and "fair" rates for their home loans, the popularity of Singapore Interbank Offered Rate (SIBOR) & Swap Offer Rate (SOR) pegged packages is increasing and major financial institutions are structuring their loans against these 2 market rates.

However, different FIs have different preferences in structuring against either the SIBOR or SOR. The list of the major FIs and their loan structures:

SIBOR
1) Standard Chartered Bank
2) Citibank
3) HSBC
4) DBS/POSB
5) OCBC
6) Maybank

SOR
1) UOB
2) CIMB

Historically, SIBOR is more stable in nature and SOR is much more volatile. Graphical comparison of the volatility of SIBOR vs SOR, which would reflect a clearer picture of the nature of the 2 market rates:



SIBOR VS SOR

Singapore Interbank Offered Rate (SIBOR)

Singapore Interbank Offered Rate is fixed by the Association of Banks in Singapore. It represents the unsecured funds/rates that banks and financial institutions in Singapore lend to each other. Local housing loan interest rates track movements in the SIBOR.

Singapore Swap Offer Rate (SOR)

Swap offer rate is fixed by the Association of Banks in Singapore. It represents the average cost of funds used by banks in Singapore for commercial lending. In Singapore, most banks offer housing loan packages pegged to either SIBOR or SOR.
SIBOR is most likely to be more stable as compared to SOR as the latter is influenced by a Forex component, which in the last few years, have been badly affected due to the erratic world economy and international exchange market. Although SOR rates have been relatively lower than SIBOR rates recently, SOR has gone through rapid movements and at times, has a much higher rate than SIBOR. This makes SIBOR more "stable" for those who are aware of the unpredictable economic changes and on par with market conditions.

Question :SOR will rise faster than SIBOR when interest rate rise?
In the event of increasing US Fed rate which will cause both SIBOR and SOR to increase. However, when interest rate rises, US dollar will also appreciate in demand. Thus SOR (which is pegged to US Dollar movement ) will increase faster than SIBOR(which is not pegged to USD)

Dear readers, do reply to this post or drop me a mail or message if you have any queries or additional informatino to share.