What you need to know about SORA and why is it replacing SIBOR?

An HDB flat in Singapore where many homeowners have taken out SIBOR-pegged home loans

What you need to know about SORA and why is it replacing SIBOR?

As a homeowner, you’ll most probably have heard of SIBOR and SOR. And if you’ve been looking up home loans lately, you might have come across the term SORA as well. 

Read: SIBOR, SOR, SORA explained: What do they mean?

Changes set for SOR and SIBOR

SIBOR, SOR, and SORA are all interest rate benchmarks. Banks use them to determine how much interest to charge borrowers or give payouts to customers. While they are used for business loans and derivatives, they’re most commonly known for pricing floating rate home loans. 

However, this is set to change as SOR and SIBOR will be replaced by SORA. 

First announced in 2019, the transition from SOR to SORA will affect a small number of homeowners. As SOR-pegged home loans aren’t as popular, banks have stopped offering them since 2017. 

But the change from SIBOR to SORA will be more extensive, as SIBOR-pegged home loans are more commonly used. 

With that, here’s what you need to know about SORA, and why it’s replacing SIBOR.  

What is SORA? 

SORA is short for Singapore Overnight Rate Average. While it’s been in the spotlight lately due to the transition, it’s not a new type of interest rate benchmark. In fact, the SORA calculation methodology has been around since 2005.

It’s derived from the volume-weighted average rate of borrowing transactions in the unsecured overnight interbank market made between 8 am and 6.15 pm. 

To put it simply, it’s based on the average rate of past interbank transactions. The rate will then be published the next day at 9 am on the MAS website. 

Though banks have only started using SORA for home loans recently, it’s been used to price commercial loans for some time. 

A white and black laptop illustrating the comparison between SIBOR, SORA, and SOR

How is SORA different from SIBOR and SOR?

The main difference is that SORA measures the actual interbank transactions. SIBOR and SOR, on the other hand, are based on projections of interbank lending rates. 

SIBOR, or Singapore Interbank Offered Rate, is based on the average rate that banks predict they might borrow from the interbank market. 

Short for Swap Offer Rate, SOR is the effective rate of borrowing SGD synthetically, by borrowing in USD first, and then converting it to SGD. 

As SORA is based on actual transactions, it’s deemed as backward-looking. In contrast, SIBOR and SOR are considered forward-looking. 

This table summarises the differences between SIBOR, SOR, and SORA. 




Calculated by

Each bank submits to ABS its projected lending rate from the interbank market. 

After the top and bottom quartiles are removed, the remaining rates will be calculated to find the average. 

Volume-weighted average rate of USD/SGD FX swap transactions, computed using the USD LIBOR. 

Volume-weighted average rate of transactions in the interbank market. 

Governed by




Currently used by
– Home loans
– Commercial and syndicated loans
– Trade financing
– Working capital financing
– Home loans
– Derivatives
– Business loans
– Home loans
– Commercial loans

Why is SORA replacing SIBOR? 

Adopting SORA is a win-win for both borrowers and lenders. For borrowers, you can benefit from more transparent interest rates. Banks also stand to benefit from better risk management. 

Here are other notable reasons why SORA is replacing SIBOR:

1. Attempt to reform SIBOR was unsuccessful

Mentioned earlier, SIBOR is based on projected interbank lending rates. However, banks haven’t been borrowing from each other due to regulatory changes after the 2008 – 2009 financial crisis. 

The Association of Banks in Singapore (ABS) and Singapore Foreign Exchange Market Committee started planning to reform SIBOR in December 2017. With the reform, the new calculation didn’t just consider interbank borrowing, but also wholesale funding transactions. In addition, it relied less on expert judgement. 

After a year of testing, it’s found that this new benchmark — termed the new polled benchmark — was unsuitable to replace SIBOR. 

It was more volatile and didn’t track as closely to SIBOR’s movements as anticipated. Thus, it was less likely to be accepted by users. These different elements also meant that it couldn’t directly replace SIBOR, and doing so would lead to extensive changes to current SIBOR contracts. 

2. The industry is already transitioning to SORA 

SOR is getting replaced due to the discontinuation of the USD London Interbank Offered Rate (LIBOR) by the end of 2021

Since SOR is being replaced by SORA, moving to a single interest rate benchmark for the SGD financial markets will be better. There’s been significant progress in the derivatives market since the transition from SOR to SORA. 

3. SORA is more transparent than SIBOR

Due to its forward-looking nature, SIBOR tends to be more exposed to market factors on a single day’s fixing as well, such as a quarter or year-end volatility. Looking at the SIBOR trend and rate history, it’s harder to predict if the rate is going up or down in future.  

Given that SORA is based on actual interbank transactions, it’s deemed more stable than SIBOR. It’s more predictable, allowing you to better insight into how much to pay for your monthly instalments. Comparing home loans will also be easier with SORA. 

On the other hand, SIBOR is based on the rate that banks decide to borrow in the future, so it’s more volatile. 

When will SORA replace SIBOR? 

A mini calendar on top of a fabric representing the transition phases of SOR replacing SIBOR

The transition is currently happening in phases, spread over 3 to 4 years until the end of 2024. 

Due to the low take-up, the 12-month SIBOR was phased out at the end of 2020. Similarly, the 6-month SIBOR will no longer be used by Q1 2022, around 3 months after the discontinuation of the 6-month SOR. 

The 1-month and 3-month SIBOR are the last ones to be phased out by the end of 2024 as they’re most commonly used. The 1M and 3M SIBOR are also the more popular types of home loans currently. 

What are your options if your home loan is pegged to SIBOR?

You’ll eventually need to switch your home loan. In the meantime, you can take the time to consider between sticking to a floating rate home loan, or changing to a fixed-rate home loan.

Floating rate home loan

Floating rate home loans are more volatile as the rates can go up and down. They’re more beneficial when interest rates are declining. 

With banks’ interest rates for floating home loans at their lowest in recent years, your home loan will benefit from the more favourable rates.

Besides SORA, other floating rate home loans are pegged to board rate and fixed deposit home rate. 

  • Board rate
    Board rate is determined by individual banks. Thus, it’s seen as less transparent compared to other types of floating rates. 
  • Fixed deposit home rate
    Fixed deposit home rate is based on the bank’s fixed deposit products.

    It works on the premise that if the bank increases the interest rate for their FD home loans, they’ll also increase the payouts for their fixed deposits. This deters the bank from changing their rates often, so there’s lower volatility in FD.

    But it is considered a banks’ managed rate since it’s still up to the bank’s discretion. 

Fixed-rate home loan

Interest rates for fixed-rate home loans are fixed for a few years, depending on your loan tenure. A fixed-rate home loan can help you manage your budget better since there’s a fixed amount to be paid every month. 

And when interest rates are increasing, you’ll get to save on the monthly instalments. 

Learn more about the different types of mortgage rates here.

Changing your home loan in Singapore

The transition from SIBOR to SORA will be gradual and spread over the next 3 years. So you’ll still have some time to go through your options before changing your home loan.

You can take this time to approach different banks to compare their home loans. But if you don’t want the hassle, you can save time by approaching a mortgage broker who can help you find a suitable home loan. 

Find out more about taking out a home loan with a mortgage broker here.

Here at FinanceGuru, we seek to help you better prepare for your finances and the upcoming milestones in your life. Learn more about how you can optimise your home loan, and uncover potential ways to save you money and time. Get a non-obligatory assessment and loan product recommendations today. 

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