Home loans in era of SORA
In perhaps the biggest shake-up for the mortgage landscape, the Monetary Authority of Singapore (MAS) launched the landmark interest rate in 2021 – SORA (Singapore Overnight Rate Average). This shift is considered a massive game-changer, and could have major impacts on existing home-owners and home buyers. So read on to find out what is this SORA is all about and how it may affect your financial decisions if you are looking at taking new home loans, refinancing or repricing of home loans.
Thus far, the US Federal Reserve has hiked interest rates by a total of 0.75% in 2022. Against the backdrop of record inflation rates in US, the Federal Reserve has also signalled their intention to increase interest rates further in the coming months. Incidentally, the rising interest rates take place at a time when MAS mandates the roll-out of SORA and discontinuation of SIBOR (Singapore Interbank Offered Rates) by 2024.
In the past, the volatility of US interest rates usually led to corresponding volatility in the SIBOR rates. However, with SORA, the situation has changed a fair bit as SORA works quite differently to SIBOR.
Before proceeding to explain what is exactly the difference between SORA and SIBOR, you should take note of the key dates:
31 March 2022 – 6-month SIBOR have ceased
31 Dec 2024 – 1-month and 3-month SIBOR will cease
Those who were on 6-month SIBOR home loans should have been notified by their banks to convert their loans.Read more