Tag Archives: Mortgage loan

SIBOR and SOR, which one is for you?

SIBOR vs SOR thinkingYou may have heard the terms SIBOR and SOR when you’re looking for a home loan. Most home loans in Singapore are based on one of these two reference rates. It can be confusing to choose between two of them for first time home-buyers.

What Are SIBOR and SOR?

SIBOR (Singapore Interbank Offered Rate) and SOR (Swap Offer Rate) are benchmark rates for commercial and private property prices in Singapore.

SIBOR and SOR based home loans are extremely popular among home buyers due to their transparency and security. Unlike some banks’ IBR (internal board rate) or variable rates, SIBOR and SOR are open to public scrutiny and are determined by the interactions between multiple banks (see next section). It is hence difficult for any individual bank to single-handedly raise the SIBOR or SOR rates.



SIBOR stands for the Singapore Interbank Borrowing Offer Rate . It is the interest rate at which banks and financial institutions in Singapore borrow from each other. Simply put, SIBOR reflects how much it would cost banks to borrow from each other.

SIBOR is administered by the ABS (Association of Banks in Singapore).  Thomson Reuters will compiles the rates from 17 banks on a daily basis.  The compiled rates are then ranked, with those on the upper and lower quartiles eliminated from the list. The remaining rates (which should come from at least eight banks) are averaged to make the day’s SIBOR. The majority of home loan packages in Singapore are based on SIBOR.



SOR rate stands for Swap Offer Rate and is likewise also a form of interbank lending rate. SOR is based on the foreign exchange rate with the US dollar. Basically, it projects what the interest rate would cost if the same amount of money were borrowed in US dollars. With forex as an extra variable in the calculation, swap offer rates (SOR) are typically more  volatile than the Singapore interbank offered rates (SIBOR). Loans pegged to SOR tend to be subjected to higher uncertainty than SIBOR based loans, and can go lower or higher  faster than SIBOR.



SIBOR is determined by the demand and supply of funds between banks in Singapore and is tied to domestic or regional market conditions. Compare to SOR which is more responsive to the American (and hence global) market which subjected to exchange rates and the American money market fluctuation,  SOR is usually more volatile than SIBOR. 

Base on the above conditions, we can say that:

  • SIBOR fluctuates less than SOR
  • Borrowers with bigger risk appetite  may prefer SOR loans as SOR tends to fluctuate more, the fluctuations of SOR can be below SIBOR sometime.
  • Borrowers with less risk appetite  may prefer SIBOR loans as SIBOR loans provides them more stability.



Below is a illustration for SIBOR and SOR rate trend from 2006 to 2014



Source - 

Singapore Property Market Cooling Measures

Below is a comprehensive view of the latest government policies related to the residential property market. These policies are often referred to as the ‘Property Market Cooling Measures‘.

Source : SRX


» Click to Calculate your Stamp Duty.

A Brief Summary of Cooling Measures

1. Additional Buyer’s Stamp Duty (ABSD)

Citizenship ABSD Rate on Primary
Home Purchase
ABSD Rate on Secondary
Home Purchase
ABSD Rate on Tertiary &
Subsequent Purchase
Singapore Citizens N/A 0% –> 7% 3% –> 10%
Permanent Residents 0% –> 5% 3% –> 10% 3% –> 10%
Foreigners1 and non-individuals 10% –> 15% 10% –> 15% 10% –> 15%

Note:1.Citizens of the USA, Switzerland, Liechtenstein, Norway, Iceland will be treated the same as Singapore Citizens due to FTA agreement.

2. Sellers’ Stamp Duty (SSD)

Residential Property Sold In Year 1 Year 2 Year 3 Year 4
SSD Rate since Feb 2010 Same as basic
Buyer Stamp Duty
SSD Rate since Aug 2010 Same as basic
Buyer Stamp Duty
2/3 of basic
Buyer Stamp Duty
1/3 of basic
Buyer Stamp Duty
SSD Rate since Jan 2011 16% 12% 8% 4%

3. Loan-to-Value (LTV) Ratio

Source: SRX / StreetSine

Policy Details

Effective Date Major Cooling Measures that Affect Residential Property Market
27 August, 2013 1. Singapore Permanent Resident Households need to wait three years from the date of obtaining SPR status, before they can buy a resale HDB flat.
2. Maximum tenure for HDB housing loans is reduced from 30 years to 25 years. The Mortgage Servicing Ratio (MSR) limit is reduced from 35% to 30% of the borrower’s gross monthly income.
3. Maximum tenure of new housing loans and re-financing facilities granted by financial institutions for the purchase of HDB flats (including DBSS flats) is reduced from 35 years to 30 years. News loans with tenure exceeding 25 years and up to 30 years will be subject to tighter LTV limits.
29 June, 2013 1. TDSR: Financial institutions are required to consider borrowers’ other outgoing debt obligations when granting property loans. His total monthly repayments of his debt obligations should not exceed 60 per cent of his gross monthly income.
2. In particular, MAS requires:
-borrowers named on a property loan to be the mortgagors of the residential property for which the loan is taken;
-“guarantors” who are standing guarantee for borrowers otherwise assessed by the financial institutions at the point of application for the housing loan not to meet the TDSR threshold for a property loan to be brought in as co-borrowers; and
-in the case of joint borrowers, that financial institutions use the income-weighted average age of borrowers when applying the rules on loan tenure.
12 January, 2013 1. ABSD: Citizens pay 7/10% on second/third purchase (from 0/3%); Permanent Residents (PR) pay 5/10% for first/second purchase (from 0/3%); foreigners and non-individuals now pay 15%.
2. LTV for second/third loan now 50/40% from 60%; non-individuals’ LTV now 20% (from 40%).
3. Mortgage Servicing Ratio (MSR) for HDB loans now capped at 35% of gross monthly income (from 40%); MSR for loans from financial institutions capped at 30%.
4. PRs no longer allowed to rent out entire HDB flat.
6 October, 2012 1. Mortgage tenures capped at a maximum of 35 years.
2. For loans longer than 30 years or for loans that extend beyond retirement age of 65 years: LTV lowered to 60% for first mortgage and to 40% for second and subsequent mortgages.
3. LTV for non-individuals lowered to 40%.
8 December, 2011 1. ABSD introduced for further cooling measures:
– Foreigners and non-individuals pay 10%, PRs buying second and subsequent property pay 3%, Singaporeans buying third and subsequent property pay 3%.
2. Developers purchasing more than four residential units and following through on intention to develop residential properties for sale would be waived ABSD
– To qualify, developers have to produce proof of development and sale within five years.
14 January, 2011 1. Holding period for imposition of SSD increased to four years from three.
2. SSD rates raised to 16%, 12%, 8% and 4% of consideration.
3. LTV lowered to 60% from 70% for second property.
4. LTV for non-individual residential purchasers capped at 50%.
30 August, 2010 1. Holding period for imposition of SSD increased to three years from one.
2. Minimum cash payments raised to 10% from 5% for buyers with one or more outstanding housing loans.
3. LTV lowered to 70% from 80% for second properties.
20 February, 2010 1. Introduction of SSD for residential property and land sold within one year of purchase.
2. LTV lowered to 80% from 90% on all housing loans except HDB loans.
14 September, 2009 1. Interest absorption scheme (deferment of instalments until TOP) and interest-only housing loans (interest payment only until TOP) were scrapped for all private properties.

Strong demand for EC , thanks TDSR

More buyers are now finding cheaper alternatives in the executive condominium (EC) market as stricter loan requirements set for private property,  media reports said.

The Topiary EC

The Topiary EC

The shift is due to the introduction of the Total Debt Servicing Ratio (TDSR) framework, which covers a borrower’s total debt repayment including mortgages. The Total Debt Servicing Ratio (TDSR) framework is to ensure borrowers are not overleveraged. TDSR calculates the percentage of your income that can go into servicing your loan. At present, the highest TDSR  is 60%.

That means your housing loan repayments, after adding all your repayment obligations (Personal loans, car debts, credit loans, renovation loans, etc.), cannot exceed 60% of your income.

This buying trend became evident when recent EC launches reportedly saw bullish sales.

 Sea Horizon EC in Pasir Ris was 3 times oversubscribed after receiving about 1,500 e-applications, the highest for an EC launched in 2013 to date. The Ecopolitan executive condominium (EC) was two times oversubscribed too.
Owners with existing HDB flats and who are applying for an EC unit have more chances to obtain the maximum loan quantum for a mortgage.

Buyers are required to sell their flats upon completion of an EC development under current HDB rules. This means banks will only consider the monthly payment on the EC and other debt obligations when evaluating the buyer’s loan eligibility.

But this is not the case for private property mortgages. Even if an upgrader is thinking of selling his HDB flat after buying a private property, the bank will still include the monthly mortgage instalment of the HDB flat together with the new commitment towards the private property when calculating the loan quantum he is eligible for at the point of application.

This reduces his or her chances of getting a bigger mortgage loan, and affects affordability especially if they have substantial debt obligations.

Source – MAS, Propertyguru, HDB

Interest rate rise ‘could hurt many households’

MORE than 9,000 households in Singapore may have trouble paying off their mortgages when interest rates rise, a new report warns.

Debts 1Analysts from Religare Institutional Research made this calculation based on the statement by the Monetary Authority of Singapore on Tuesday.

MAS had said that 5 to 10 per cent of borrowers here have probably overstretched themselves on their property purchases. That is, their total debt servicing payments, including those for their home, car and other loans, amount to more than 60 per cent of their income.

If mortgage rates were to rise by 3 percentage points, the proportion of borrowers at risk could reach 10 to 15 per cent, the MAS said.

The central bank had also pointed out that the vast majority of mortgage loans here are on floating-rate packages, so many households will face higher monthly repayments when interest rates rise.

Religare noted in its report yesterday that there are 90,000 new homes coming onto the market from now to 2016.

This “means over 9,000 troubled units could be on the market”, it said.

“That is more than half a year of new home supply and over 3 to 4 per cent of total private housing units.”Debts

Another worrying statistic, Religare said, is that only 70 per cent of existing property loans are for owner-occupied homes. This shows that investor demand in private homes is running quite high, the analysts wrote. “A little wobble in prices, combined with higher interest rates, might shake up a few property investors as well and add to the possible troubled units on the market.”

MAS deputy managing director Teo Swee Lian had said at the release of the MAS annual report on Tuesday that there is a much lower chance of a default if a loan is for an owner-occupied home.

Sourced from – http://www.stproperty.sg

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