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After December 31, 2024, SIBOR will be replaced by the Singapore Overnight Rate Average (SORA)

The Shift from SIBOR to SORA

For homeowners in Singapore, especially those with existing home loans tied to the Singapore Interbank Offered Rate (SIBOR), a significant change is on the horizon. After December 31, 2024, SIBOR will be replaced by the Singapore Overnight Rate Average (SORA). This transition impacts all SIBOR-based home loans, including both floating and fixed-rate packages. Here's what you need to know to make informed decisions in this evolving landscape.

Understanding the Background

In 2019, the Monetary Authority of Singapore (MAS) initiated the Steering Committee for SOR & SIBOR Transition to SORA (SC-STS). This industry-led committee aimed to oversee the transition from SIBOR to SORA, emphasizing greater efficiency and transparency in risk management for lending institutions and borrowers, respectively.

SORA, administered by MAS, stands out for its daily publication as a rate and a series of compounded average rates, offering stability and reliability anchored to actual market transactions. In contrast, SIBOR, based on estimates, may lack full backing by transactions.

Options for Homeowners

  1. Switch to an Alternative Property Loan Package (Before April 30, 2024):

  • Contact your bank to explore prevailing fixed or floating rate loan packages.

  • Staying with the same financial institution can avoids re-computation of mortgage ratios.

  • Refinancing with another institution may involve re-computation according to prevailing rules and so it is better to change with your mortgage specialist.

  1. Take up the SORA Conversion Package (Before April 30, 2024):

  • Opt for the SORA Conversion Package (SCP) without additional fees or lock-in periods.

  • Components include the unchanged loan margin, three-month compounded SORA, and an adjustment spread.

  • Adjustment spread calculated monthly, offering stability in loan payments during the transition.

  1. Automatic Conversion from SIBOR to SORA (Starting June 1, 2024):

  • If no proactive choice is made by April 30, 2024, loans automatically convert to SCP in June 2024.

  • Adjustment spread computed historically, providing early certainty on applicable rates.

Taking a Hands-On Approach

Given that a mortgage is often a homeowner's largest financial commitment, careful consideration is crucial. Until April 30, 2024, homeowners can refer to the ABS website to evaluate the monthly adjustment spread against the historical median. By staying proactive, individuals can lock in favorable rates or explore alternative packages tailored to their financial goals.

As the financial landscape evolves, homeowners have the opportunity to make choices aligned with their financial well-being. Whether opting for a new property loan package, embracing the SORA Conversion Package, or allowing automatic conversion, staying informed and proactive is key. Engage with your bank or relationship manager early to assess which option best suits your unique financial preferences. The shift from SIBOR to SORA presents challenges but also opportunities for homeowners to secure stable and advantageous mortgage terms.

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