SORA-pegged Property Loans: We Speak to Those Who’ve Signed Up

SORA home loan Singapore - what do those who've signed up think?

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By now, you’d probably have heard of SORA, the Singapore Overnight Rate Average, especially if you’re a property owner considering a floating rate loan.

SORA will be replacing the current interest rate benchmarks — SOR (Singapore Dollar Swap Offer Rate) and SIBOR (Singapore Interbank Offered Rate). SOR and SIBOR were commonly used by banks in their floating rate property loan offerings, but banks have ceased issuing new SOR-pegged property loans since May 2021, and have also stopped offering new SIBOR-pegged property loans from October 2021.

Those of us with existing SOR- and SIBOR-pegged property loans will need to switch to a SORA-pegged property loan or alternative loan packages.

  • For existing borrowers with SOR-pegged property loans, you should contact your bank immediately to explore options for switching to an alternative loan package. 
  • For existing borrowers with property loans that reference the 6-month SIBOR, which will discontinue by 31 March 2022, you should contact your bank immediately.
  • For existing borrowers with property loans that reference the 1-month or 3-month SIBOR, banks will be contacting affected borrowers in due course, to provide them with options for replacing their SIBOR loan with other loan packages. The 1-month and 3-month SIBOR will only be discontinued after 31 December 2024.

For those on a SOR-pegged property loan, one option is to take the SORA Conversion Package, which is being offered to existing SOR-pegged property loan customers by the retail banks in Singapore. It will be available until 31 October 2022.

What is the SORA Conversion Package? 

  • The SORA Conversion Package switches a borrower’s existing SOR loan to a comparable SORA loan, while minimising differences in interest payments at the point of conversion. 
  • It does so by applying an adjustment spread, known as the Adjustment Spread (Retail), to the existing SOR loan margin. 
  • The Adjustment Spread (Retail) is necessary when converting a SOR-based loan to a SORA reference, because SOR factors in a term and credit risk premium while SORA does not.
  • To smoothen the transition, SC-STS has also recommended that banks provide this conversion to customers with no additional fees or lock-in period.

Apart from the SORA Conversion Package, you may also choose to switch to any other loan package (e.g. a fixed rate loan) that your bank offers, subject to the prevailing terms and conditions.

Find out more about what will happen when SOR and SIBOR transition to SORA

And if you’re a property owner shopping for your first property loan, or if you’re thinking about refinancing your existing property loan, you can consider a SORA-pegged loan as an option for a floating rate package.

Here’s a brief overview of what SORA is: 

  • A transparent, robust and reliable interest rate benchmark that is based on overnight borrowing transactions between banks in Singapore.
  • SORA is administered by the Monetary Authority of Singapore (MAS), and is published daily on the MAS website.

Note: Just like other floating rate packages, the loan repayments for SORA property loan packages could go up or down depending on prevailing market conditions.

How is your property loan interest rate calculated from SORA?

Most SORA-pegged property loans are based on the 3-month Compounded SORA. This means that the interest rate is less volatile as banks take all SORA readings over the past 90 days into account, rather than a single day’s reading.

SORA-based property loans will gradually reflect changes in the interest rate environment over subsequent months, affording you time to budget your finances properly. Note that since SORA-pegged property loans are floating, your interest rates will still be affected by market fluctuations over time.

Read more: 3 Features of a SORA-pegged Property Loan & What Homeowners Think About It

If you’re looking for a bank loan and prefer a floating rate property loan, you can consider SORA-pegged property loan packages.

So what does being on a SORA-pegged property loan mean for homeowners? We speak to some property owners who have opted for a SORA-pegged property loan.


Property owner 1: New loan of $660,000, $2,120 monthly repayment, 30 years tenure

First-time property owner Alvis Wong, 31, took up a new property loan pegged to 3-month Compounded SORA, with a 2-year lock-in period.

The Customer Success Manager, who owns a 2-bedroom condominium, signed up for the loan package in August 2021.

He says: “The main reason why I signed up for the SORA-pegged loan was to benefit from the lower interest rate. At the time, the fixed interest rate was about 1.1% while the all-in-rate for the 3-month SORA loan package was around 0.93%.”

Alvis adds that SORA seems to be “a lot more transparent” as one can easily track historical rates from MAS.

Even though some people may think that floating rate property loans do not provide a sense of security as the monthly repayment varies each quarter, Alvis sees the SORA-pegged property loan he has taken up as a way to save some money for the first 2 years of his loan, as he expects interest rates to remain low in the near term.

He shares: “The estimated repayment for my SORA-pegged property loan (principal plus interest) per month is $2,120 as opposed to $2,180 (fixed rate property loan).

“Of course, I don’t expect the SORA rate to remain low for the entire loan tenor, but at least I can leverage the low interest rates for the time being,” he adds.


Property owner 2: New loan of $699,000 loan, $2,800 monthly repayment, 23 years tenure

Chung Wan Thim, who has a 2-bedroom condominium, took up a SORA-pegged property loan on 1 September 2021, with a 23-year tenure.

Says the 42-year-old IT Trainer: “I signed up for the SORA package as the interest rate is lower than the fixed rate package currently available.”

The fact that SORA is transparent and the rate is published on the MAS website also contributed to his decision.

Being able to better anticipate how his mortgage repayments could change was something he appreciated, and the SORA 3-month compounding rate provides him with factual data to better manage his loan repayments in future.


Property owner 3: Outstanding loan of $1.36 million, $4,400 monthly repayment, 30 years tenure

Gerald Tan switched to a loan pegged to 3-month Compounded SORA just last month, when he refinanced his property.

The 34-year-old cybersecurity professional is the owner of a private property in district 13.

When asked why he switched to a SORA-pegged property loan, Gerald says: “I switched because it’s based on market rate from actual transactions. I also like its transparency as the rates are published daily on MAS’ website.”

“Since compounded SORA has a smoothing effect, it’s more predictable in terms of financial planning. I’ll have a better grasp of the monthly repayment amount, and be able to plan my finances for kids’ education, investment, insurance as well as savings,” he adds.

Having this peace of mind when it comes to planning for his finances also contributed to Gerald’s decision to switch. 

SORA and you

Whether you’re on an existing SOR or SIBOR-pegged property loan, looking for a new property loan, or thinking of refinancing your current property loan, SORA is here to stay.

Find out more about it and research the SORA-pegged property loan packages offered so you can make an educated decision on which loan package is right for you.

Reach out to your bank to find out more.