Sibor vs SOR Home Loan
Singapore Inter-bank Offered Rate (SIBOR)
Sibor is the rate at which banks lend to one another in SGD. When it falls, so does the mortgage rate of Sibor-linked Mortgages. Sibor is fixed based on the funds’ supply and demand. It symbolizes the unsecured/flexible funds that the financial institutions and banks lend to each other.
Singapore Swap Offer Rate (SOR)
SOR represents the cost of borrowing SGD synthetically through borrowing USD and swap out in return for SGD for the same tenor.
Advantages and Disadvantages of SIBOR and SOR
It is important to understand about Sibor and SOR because the interest rates of the local housing loans trail movements in this rate.
When it comes to stability, SIBOR has an edge compared to SOR. The latter is influenced by Forex trade which is already unstable due to the unpredictable world market and exchange rates. Regardless of the alteration in the market conditions, the SIBOR rates would remain secure. Although it has higher rates at times, it will not have rapid increase in rates due to economic fluctuations unlike that of SOR rates.
To conduct your business dealings safely it is wise to invest on a real estate attached to SOR provided that the lock-in period is short. But if the lock-in period is for an extensive period of time, SIBOR will be a better choice.
The simple reason for this choice is the fact that the growth forecast as well as the local economic condition is affected by the prevailing international economic crisis. Nonetheless, for someone who has a positive forecast of the future market, pegging to SOR rates will be worth the risk.
Talk to a Singapore mortgage broker today for your home loan needs.