What is the Swap Offer Rate (SOR)?
The Swap Offer Rate, or SOR, is a rate used to determine the cost of borrowing Singapore dollars by borrowing US dollars and then exchanging them into Singapore dollars in the foreign exchange market.
Due to its volatile rates, SOR will no longer be used as of June 30, 2023.
What should SOR borrowers expect?
There are two options for borrowers:
- SORA Conversion Package
Borrowers who have not yet switched from their SOR residential loan package will be automatically converted to the SORA Conversion Package in October 2022 by their bank to avoid any disruption to their loan when SOR is discontinued.
In this option, the bank will take the following steps:
The borrower’s SOR loan will be converted to a SORA loan by adding a standardised Adjustment Spread (Retail) to the original loan margin.
An adjustment spread is necessary to account for term and credit risks, which SOR factors in but SORA does not. Therefore, SORA is generally lower than SOR.
The Adjustment Spread (Retail) will be calculated based on the average difference between SOR, and 3-month SORA compounded in advance over the previous three months, with a minimum of zero.
There will be no additional fees or lock-in period if the borrower switches to the SORA Conversion Package their existing bank provides.
- Switch to any other loan package that your bank is currently offering
Your bank may have other loan packages you can choose from instead of the SORA Conversion Package.
These include fixed-rate or floating-rate property loans based on the bank’s board rate or fixed deposit rates.
Even if your SOR loan has already been converted to the SORA Conversion Package, you can still switch to another loan package offered by your bank.
If you choose to do so before June 30 2023, you will not incur any fees.
It is advisable to contact your bank at the earliest opportunity to discuss your options and prevent any interruptions to your loan when SOR ends.
