Housing Loan Singapore | Mortgage Home Loan

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SOR went negative

I was surprise to see that the SOR rate (11 August) went negative this morning. I even refresh my screen a couple of times. I believe this may be due to the Fed decision to keep interest rate low till mid 2013.

Generally, for banks who provide home loan that are pegged to Sibor/SOR, they will take the Sibor/SOR of the 1st day of the month where the loan is disbursed. Therefore at this moment, majority of the loan owners are not affected. If SOR stays negative on the 1st day of the month, i believe they will have some arrangement to it – perhaps a minimum SOR rate impose. Just my personal view.

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Sibor vs SOR Mortgage – which is better

Many times, i receive enquiry on clients wanting me to recommend Sibor or SOR for their mortgage loan. I usually educated them by sharing basic fundamental of Sibor and SOR with them. The fact is – Sibor is more stable and SOR is more volatile. Baseline is – both have their strength and weaknesses.

I been tracking both Sibor and SOR for a long time, especially 3 months Sibor and SOR as they are commonly used by banks for home loan.  For this period, I personally feel that SOR is better to tag on as for the past 1 year, 3 months SOR has constantly be lower than 3 months Sibor. If you have a SOR package them comes with no lock in (look for Bank A) or allowing the toggling function between Sibor and SOR (look for Bank C), the only thing you need to worry of is clawback (legal subsidy, valuation fee and fire insurance).

See below for the chart