The Difference Between SIBOR and SOR Based Home Loans in Singapore

If you’re looking for a home loan, you may have heard the terms SIBOR and SOR. Most home loans in Singapore are based on one of these two reference rates. Depending on the market situation, the SIBOR and SOR offer different advantages (and drawbacks) to anyone with a home loan. Choosing between the two can be confusing for first time home-buyers. So in this article, we attempt to clarify the pros and cons of either option:


Accounting documents

SIBOR and SOR rates determine the interest you pay out, and how much you pay each month.


What Are SIBOR and SOR?

SIBOR (Singapore Interbank Offered Rate) and SOR (Swap Offer Rate) are benchmark rates for commercial and private property prices in Singapore. They can be checked in finance papers (e.g. Business Times), websites like Bloomberg, and on Teletext.

SIBOR and SOR based home loans are extremely popular among home buyers and are preferred because of their transparency and security. Unlike some banks’ IBR (internal board rate) or variable rates, SIBOR and SOR are open to public scrutiny and are determined by the interactions between multiple banks (see next section). It is hence difficult for any individual bank to single-handedly raise the SIBOR or SOR rates. The same however cannot be said for home loans pegged to variable rates.


How SIBOR Works

SIBOR is based on the interest rates used by banks in Singapore when lending unsecured funds to each other. Simply put, SIBOR reflects how much it would cost banks to borrow from each other.

SIBOR is administered by the ABS (Association of Banks in Singapore). On a daily basis, Thomson Reuters compiles the rates from 17 banks. The compiled rates are then ranked, with those on the upper and lower quartiles eliminated from the list. The remaining rates (which should come from at least eight banks) are averaged to make the day’s SIBOR.

The majority of home loan packages in Singapore are based on SIBOR.


Singapore bank buildings

SIBOR is a domestic rate, and is preferred for its stability.


How SOR Works

SOR is based on the foreign exchange rate with the US dollar. In a simple sense, it projects what the interest rate would cost if the same amount of money were borrowed in US dollars.

SOR is derived using the following formula:

USD/SGD Forward Rate = USD/SGD Spot Rate +/- SWAP Pts

SOR is responsive to the current state of the US economy. At present, only two banks in Singapore offer SOR based home loans.


How SIBOR / SOR is Factored into a Home Loan

SIBOR and SOR are expressed as a single percentage (e.g. 0.378%). A number (of months) is also stated in front of the rate. For example:

3 Month SIBOR = 0.378%

This means that the SIBOR rate is 0.378%, and that the rate is updated (or “refreshed”) every three months. For home loans in Singapore, it is most common to see 1 month and 3 month rates. However, some unusual loan packages might come in 2, 6, 9, or 12 month formats.



One month rates may be cheaper now, but they also cause your repayments to fluctuate every month. Consider carefully.


The complete home loan rate is then calculated by adding the bank’s charges (the fixed spread) to the SIBOR or SOR rate. This total interest is what determines your monthly payments. For example:

3 Month SIBOR + 0.70%

The 3 Month SIBOR rate is 0.378%.
The loaning bank has a fixed spread of 0.70%.
The total interest for the month: 0.378% (3 Month SIBOR) + 0.70% (fixed spread) = 1.078%

SIBOR or SOR based home loan packages in Singapore are structured such that home buyers will be able to determine what their interest payments are every year till the end of the loan tenure. For example:

Year 1:  3 Month Sibor + 0.75%
Year 2:  3 Month Sibor + 0.85%
Year 3:  3 Month Sibor + 0.95%
Year 4 (onwards):  3 Month Sibor + 1.25%

Since all banks share the same SIBOR / SOR rates, the fixed spread component is ultimately what differentiates home loan packages from each other. The lower the spread the better!


Which is Better, SIBOR or SOR?

SIBOR is determined by the demand and supply of funds between banks in Singapore. In theory, SIBOR is tied to domestic or regional market conditions, whereas SOR is more responsive to the American (and hence global) market.

Because exchange rates and the American money market fluctuate more, SOR is more volatile than SIBOR.


14 Wall Street Sign

SOR provides the best opportunities for huge savings, if you can weather its volatile movements.


SIBOR and SOR move in tandem; so when SOR rises, SIBOR also rises; when SOR falls, so will SIBOR. However, SIBOR tends to creep up or down in small increments, whereas SOR might move in dramatic swings.

Borrowers who pick a SOR package count on its ability to fall rapidly. When SOR rates plummet, the borrowers save a lot of money, compared to SIBOR’s small dips. However, SOR can also rise faster than SIBOR, making it inappropriate for risk-averse borrowers.


How to Find SIBOR and SOR Packages

To find out which banks are offering SIBOR and SOR packages, visit loan comparison websites like You can also follow us on Facebook, and we’ll update you on great packages as we spot them.

Besides SIBOR and SOR, you will also want a low fixed spread from the bank. Mortgage Specialists from will be able to compile existing rates for you.

Image Credits:
kenteegardin, Nicolas Lannuzel, hernibergius, Alex E. Proimos

Do you prefer SIBOR or SOR? Comment and tell us why!

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