The SIBOR and SOR home loans that we see today in Singapore are pretty recent inventions. Before they appeared in 2007, most home loans are pegged to banks' board rate, which is essentially tied to either of these reference rates but not in a transparent way.

SIBOR and SOR loans are considered transparent as both SIBOR rates and SOR rates are available to the public (published by the Association of Banks in Singapore).

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Your mortgage loan rate is usually benchmarked against a publicly available financial indicator, such as the SIBOR or SOR.

SIBOR stands for the Singapore Interbank Offered Rate and is a daily reference rate based on the interest rates at which banks offer to lend to other banks in the Singapore wholesale money market.

SOR is the Singapore Swap Offer Rate and is calculated based on a formula that takes into account the current and expected exchange rates of the US dollar against the Singapore dollar.

Both SOR and SIBOR come in 1, 3, 6 and 12 month tenure, corresponding to the cost of borrowing for that duration. Banks typically charged a certain fixed spread above the prevailing SOR or SIBOR Rate, example SIBOR + 1%.

Both SIBOR and SOR move in the same direction. If SIBOR goes up, SOR also goes up. If SIBOR falls, SOR also falls. But between the two benchmarks, the SOR is known to be more volatile as it is tied to currency exchange rates.

Generally speaking, SOR home loans are more attractive if you think that interest rates are going to fall, as SOR rates will fall faster than SIBOR.

What Affects SIBOR And SOR Rates?

SIBOR – The US Fed rates and availability of funds in Singapore banking sector

SOR – Exchange rate between Singapore dollar and US dollar

Both SIBOR and SOR rates spiked in 2015 after the US Federal Reserve announced that financial markets can expect a rate hike in the near future after years of near-zero interest rates.

Calculating Your Monthly Repayments

Let us look at the effect of a rate rise on your monthly repayment.

Repayment for loan of $800,000 30-year loan:

From the above calculations, you can see that a small percentage increase can lead to a substantial increase in monthly repayments.

Your monthly instalment repayment consists of two parts – principal repayment and interest payment.

It will be best if you could ask your bank for a loan repayment schedule which shows clearly how much you have to pay each month for both the initial years as well as over the entire loan tenure.

If you are able to pay off more than the stated monthly repayments, you can consider shortening the loan tenure, reducing the loan quantum by paying off part of it earlier or increasing your monthly repayment.

By doing this, you will be able to save on the total amount of interest paid over the entire loan tenure.

To help Singaporeans get a better understanding of the basics of home loans, you can check out's Home Loans Guide here and also the guide to SIBOR and SOR home loans in Singapore.

Here are 4 things to consider when comparing home loans and 4 things to consider when doing a home loan refinancing.