Sibor and SOR Rates

Past 10 years Historical Sibor Chart 2004 - 2014 SingaporeWhat is SIBOR Rate?

SIBOR stands for the Singapore Interbank Borrowing Offer Rate and is a key component used by banks in setting their home loan rates.

Sibor is the rate at which banks lend to one another. When the Sibor rates fall, home loan packages pegged to the Sibor rate will fall in tandem, likewise when the Sibor rate increases, you will see an increase in your monthly repayments on your Sibor-linked mortgages.

The Sibor rate comes in tenor terms of 1/3/6/12 months with most banks in Singapore offering home loan / mortgages in either the 1 month or 3 months tenor. A longer term tenor typically comes with a higher interest rate.

Banks typically charged a certain fixed spread above the prevailing Sibor Rate, example Sibor + 1%.

The rate is publicly available in Business Times, Teletext and the web.

 

What is SOR Rate?

SOR rate stands for Swap Offer Rate and is likewise also a form of interbank lending rate.

I’m going to spare you the financial jargon or theoretical textbook definition for it. The Swap Offer Rate is basically a US dollar funding mechanism and as the name “swap” suggest, in layman terms, it basically implies the swapping of SGD funds for USD dollar funding at a certain cost (which is the SOR rate) for a certain tenor (1/3/6/12 months).

The SOR rate comes in tenor terms of 1/3/6/12 months. A longer term tenor typically comes with a higher interest rate.

Banks typically charged a certain fixed spread above the prevailing SOR Rate, example SOR + 1%.

The rate is publicly available in Business Times, Teletext and the web. 

 

SIBOR vs SOR?

Sibor is funded in Singapore dollars. The base currency for Swap Offer Rate (SOR) funding is in USD.

In more recent years, SOR is typically lower as compared to SIBOR but due to the FX exposure inherent in SOR USD funding, SOR tend to be more volatile as compared to SIBOR. 

 

What is the SIBOR and SOR rate trend over the past 3 years?

Sibor has been hovering at between 0.35% ~ 0.56% over the past 3 years.

SOR rate have been hovering at between 0.2% ~ 0.3% over the past 3 years. The SOR rate went negative at one point in time in August 2011 due to the huge influx of US dollars flowing into Singapore.

 

Why is SOR lower than SIBOR?

SOR have typically been higher than SIBOR prior to the introduction of FED's Quantative Easing (QE) programs due to transactional costs involed for Swap Offer contracts.

With the introduction of FED's Quantitative Easing (QE) programs, US dollar have grown substantially weaker and gain FX advantage spread that overcomes the SOR transactional cost spread. In the more recent years, SOR have hence exhibited trends of it being lower than SIBOR.

 

Related Links:

+ Reading your Credit Bureau Report

+ Types of Home Loans

+ Home Loan Guide 101

 

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