Existing interest rate benchmarks – the Singapore Dollar Swap Offer Rate and the Singapore Interbank Offered Rate – are being phased out over the next two to three years. In tandem, banks here are shifting to the Singapore Overnight Rate Average , which will become the main interest rate benchmark for Singapore dollar loans going forward.
SIBOR is also being phased out in line with other interbank offered rates across the world. The six-month SIBOR will be discontinued after Mar 31, 2022, while the one-month and three-month SIBOR will be discontinued after Dec 31, 2024. You should discuss with your bank how the loan spreads and overall interest rates differ across the options.Borrowers today are familiar with the use of SOR or SIBOR interest rates where, for instance, interest payments due at the end of each interest period of the property loan are typically based on the SOR or SIBOR rate at the start of that period.
Regardless of the approach, the averaging effect of the compounded SORA rates helps to smooth out interest rate fluctuations. Interest payments for SOR and SIBOR loans rely on a single day’s reading on the date when the interest rate resets, making them more exposed to idiosyncratic market factors on that particular day.For SOR loan holders, you should contact your bank as soon as possible to explore options to switch to an alternative loan package that meets your business needs.
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Source: ChannelNewsAsia - 🏆 6. / 66 Read more »
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