{"id":48110,"date":"2022-02-07T15:35:12","date_gmt":"2022-02-07T07:35:12","guid":{"rendered":"https:\/\/www.99.co\/singapore\/insider\/?p=48110"},"modified":"2022-06-13T17:57:52","modified_gmt":"2022-06-13T09:57:52","slug":"sora-pegged-home-loan-5-key-things-switching-sor-sibor","status":"publish","type":"post","link":"https:\/\/www.99.co\/singapore\/insider\/sora-pegged-home-loan-5-key-things-switching-sor-sibor\/","title":{"rendered":"SORA-pegged home loan: 5 key things to know if you’re switching from SOR or SIBOR"},"content":{"rendered":"
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The impending inflation and\u00a0<\/span>rise of interest rates<\/span><\/a>\u00a0are upon us, with the United States Federal Reserve looking to raise interest rates as early as March 2022.\u00a0<\/span><\/p>\n

Singapore pegs its interest rates close to that of the US, so we\u2019re likely to see our interest rates edge higher as well.\u00a0 <\/span>UOB economists predict that the key benchmark rate of SORA might shoot from 0.25% in Q1 2022 to 1.01% by the end of the year.\u00a0<\/span><\/p>\n

What does this mean?<\/span><\/strong><\/h2>\n

This means that if you currently have a mortgage, your mortgage payments will be higher. Mortgage loans make up more than 75% of a household’s monthly recurring expense. <\/span>MAS advises households to be mindful of their ability to service mortgage obligations. It is also recommended that highly leveraged households should build up financial buffers.\u00a0<\/span><\/p>\n

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Oh man, why are houses so expensive? Maybe I should stay home more to get the full value out of my house.<\/figcaption><\/figure>\n

Singapore\u2019s current benchmarks<\/span><\/strong><\/h2>\n

Right now, the most common interest rate benchmarks are the Swap Official Rate (SOR) and Singapore Interbank Offered Rate (SIBOR). <\/span>They\u2019ve served as the cornerstones for interest rates for at least two decades, since the late 1990s.\u00a0<\/span><\/p>\n

We\u2019ve covered the differences between SOR and SIBOR in-depth\u00a0<\/span>here<\/span><\/a>.<\/span><\/p>\n

1. Transitioning to SORA<\/span><\/strong><\/h2>\n

SOR and SIBOR are currently phasing out to make way for SORA, the new gold standard moving forward. As of March 2021, the option for SORA has been rolled out by most major banks, with more than S$1 billion of such loans extended so far.\u00a0<\/span><\/p>\n

The MAS has formed the Steering Committee for SOR & SIBOR Transition to SORA (<\/span>SC-STS<\/span><\/a>). It consists of a main Steering Committee comprising senior representatives from key banks in Singapore, relevant industry associations, and the MAS.<\/span><\/p>\n

The SC-STS\u2019 role is to ease an industry-wide transition from SOR to SORA. Industry participants include commercial and retail customers (such as homeowners with current bank loans).\u00a0<\/span><\/p>\n

Here are some deadlines to note:<\/span><\/p>\n