Should You Choose a SIBOR or SOR Rate?

That depends on both your appetite for risk and your knowledge of the property market. If you’re a property investor who knows your budget well, you can safely go with a SOR package as long as you’re not locked-in for too long.

On the other hand, if you are buying a property as a long-term owner-occupier, selecting a fixed-rate loan that’s tied to the SIBOR rate would be a safer choice for you.


What Is the Singapore Interbank Offered Rate (SIBOR)?

The Singapore Interbank Offered Rate (SIBOR) is a type of interest rate that’s fixed by the Association of Banks in Singapore. SIBOR represents the unsecured funds/rates that banks and financial institutions in Singapore lend to each other.


What Is the Singapore Swap Offer Rate (SOR)?

The Swap Offer Rate (SOR) is a type of interest rate fixed by the Association of Banks in Singapore. SOR represents the average cost of funds used by banks in Singapore for commercial lending.


How do SIBOR and SOR Work?

In Singapore, most banks offer housing loan packages tied to either the SIBOR or SOR rate. Think of it as a “cost price” for the bank. That’s because they add a margin on top of the SIBOR/SOR rate called a “spread.” So when you get a home loan, the bank interest rate will be the SIBOR/SOR rate plus the spread.


What SIBOR/SOR Options Are Available?

There are several SIBOR/SOR choices available including 1, 3, 6, 9, and 12-month SIBOR/SOR options. When choosing an option, it’s important to note that shorter terms have lower interest rates, but can change more frequently. The interest rate on longer terms will be higher, but it will remain stable during the term.

Let’s say you’re looking at a 1-month SIBOR at 0.2% and a 12-month SIBOR at 1%. The 1-month SIBOR is much lower, but will fluctuate frequently. So if it spikes to 1.2%, 6 months later, the 12-month SIBOR was a better choice.


Are SIBOR/SOR Rates Better Than Bank Board Rates? 

When applying for a home loan with a bank, you’ll need to choose between fixed or floating rate packages. If you choose a floating rate, you’ll need to consider choosing between a SIBOR, SOR or Inter-Bank Rate (IBR) package, which fluctuates according to the bank’s internal board rate.

SIBOR rates are more stable compared to SOR rates, which are influenced by FOREX, and have become unpredictable due to the erratic world economy and international exchange market.

Although SOR rates have been lower than SIBOR at times, market conditions can force SOR rates to rise even higher than SIBOR rates. Because of this, SIBOR rate are considered a more stable choice if you’re aware of property market changes and the economy.

Note: Always choose a bank or financial institution that’s transparent about their interest rates. That’s because choosing a floating rate package tied to the IBR set by the banks can put you at risk for higher loan repayments.