What is SIBOR (Singapore Interbank Offered Rate)?

SIBOR is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Singapore wholesale money market (or interbank market). It is similar to the widely used LIBOR (London Interbank Offered Rate), and Euribor (Euro Interbank Offered Rate). Using SIBOR is more common in the Asian region and it is administered by the Association of Banks in Singapore (ABS). It is a major benchmark of Cost of Funds for banks in Singapore.

How does it work?

An individual ABS SIBOR contributor bank contributes the rate at which it could borrow funds, were it to do so by asking for and accepting inter-bank offers in a reasonable market size, just prior to 1100 hrs (the 11AM Fixing).

Every day, Thomson Reuters helps ABS compile the rates from 17 different banks. 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.

SIBOR comes in 1-, 3-, 6- , or 12-month tenure. At the end of the tenure, the borrowing bank returns the borrowed fund to the lending bank. Therefore SIBOR pegged mortgage packages change rates in 1-, 3, 6- or 12-month frequency accordingly. Most banks offer only 3-month SIBOR.

SIBOR is mainly affected by demand & supply of the Singapore dollar, global economy and US Federal Reserve rate, especially the latter. It is considered the most widely used reference rate for home loan packages in Singapore and all other mortgage benchmarks are mainly affected by SIBOR & US FED Reserve Rate.

Why choose SIBOR pegged packages?

SIBOR is transparent. You can find it on major financial papers including The Business Times as well as financial websites like Bloomberg.

Banks package the mortgage as “bank’s loading /spread+ SIBOR” where banks decide how much to add on top of SIBOR for each year ranging from 0.6% – 1.5% which is normally guaranteed, and SIBOR movement will be the factor causing total effective rate to rise or fall.

SIBOR pegged mortgage packages were first introduced to the mortgage market in late 2007 when there were huge complaints about traditional non-transparent board rate pegged packages rate rising too fast and too often. SIBOR pegged packages became popular in 2008 as SIBOR dropped gradually from slightly above 2.5% in late 2007 to as low as just above 0.3% in 2011 and remained at the similar level till late 2014. However it is falling out of favour recently as SIBOR is inching up due to global market expectations of possible US FED Rate hikes after January 2015 bringing an end of the low interest rate era.

Even though SIBOR is expected to increase further some clients are still keen to check out SIBOR packages as the spread from some banks could be as low as 0.6% – 0.7% throughout the loan tenure.

After all SIBOR affects almost every financial activity and it is worth keeping an eye on its movement.


What is SOR (Singapore Swap Offer Rate)?

SOR is “the expected forward exchange rate between the US dollar and Singapore dollar”.

SOR is derived using the following formula:

USD/SGD Forward Rate = USD/SGD Spot Rate +/- SWAP Pts.

How does it work?

Like SIBOR, SOR also comes in tenures of 1-, 3-, 6- , or 12-month. At the end of the tenure, the USD will be converted into SGD. Therefore SOR pegged mortgage packages change rates in 1-, 3, 6- or 12-month frequency accordingly.

Like SIBOR, Banks package the mortgage as “bank’s loading /spread+ SOR”

However, as it is linked to currency movements, it is more volatile than SIBOR. Like SIBOR, SOR is set by the Association of Banks in Singapore, and is also publicly available. Some residential property loans in Singapore are pegged to SOR, but SOR-pegged mortgages are more volatile therefore fewer banks offer SOR pegged packages, and if they do they typically use the 3-month SOR.

Why choose SOR pegged packages?

SOR is more transparent than traditional non-transparent board rate pegged packages, however, it is not as stable as SIBOR. That is why though it was introduced slightly earlier to the mortgage market than SIBOR but it soon lost out to SIBOR pegged packages. Some banks try to make the package attractive by offering low spread/loading from 0.65% – 0.7% throughout loan tenure and without any lock in period to suit some clients’ plan to sell the property early.

FHR, FHR18 & 36 FDMR

What are FHR (Fixed Deposit Home Rate), FHR18(Fixed Deposit Home Rate 18) & 36 FDMR(36-month Fixed Deposit Mortgage Rate)?

Both FHR & FHR 18 are offered by DBS. FHR (Fixed Deposit Home Rate) is calculated based on the average between the prevailing twelve (12) months and twenty four (24) months Singapore Dollar Fixed Deposit interest rate for amounts within S$1,000 to S$9,999 or such other sum as the bank may specify. The current FHR is 0.675% per annum. This benchmark was introduced in early 2015 and replaced by FHR18 in the later part of 2015.

FHR18 (Fixed Deposit Home Rate 18) is calculated based on the prevailing eighteen (18) months Singapore dollar fixed deposit interest rate of DBS Bank for amounts within $1,000 to $9,999 or such other sum as the bank may specify. The current FHR18 is 0.6% per annum. Please refer to their website for their latest update http://www.dbs.com.sg/personal/rates-online/singapore-dollar-fixed-deposits.page

36FDMR (36-month Fixed Deposit Mortgage Rate) is pegged to OCBC’s 36-month SGD Fixed Deposit rate for amounts between $5,000 and $20,000. The 36-month SGD Fixed Deposit Rate (0.65% per annum currently) may be found on OCBC’s website at http://www.ocbc.com/personal-banking/Accounts/sgd-fixed-deposit-interest-rates.html

How do these benchmarks work?

In nature the 3 benchmarks are similar:

They are all pegged to the bank’s own fixed deposit rate and are actual deposit interest that banks need to pay for money collected from individual depositors and it is in the bank’s interest not to increase the bank’s cost of funds.

However the benchmarks are still affected by SIBOR which in turn is affected by the US Fed Reserve Rate. This explains why DBS increased both FHR & FHR18 around Christmas 2015.

The benchmarks are transparent as the rates are published on the bank’s respective websites.

Why choose FHR/FHR18/36FDMR pegged packages?

Those packages are popular since they were launched in 2015 as they won’t increase as fast and high as SIBOR/SOR as the banks have to take the costs of funds from their depositors into account.

Similar to SIBOR/SOR packages, banks add a loading/spread on top of FHR/FHR18/36FDMR. Banks decide how much to load for each year ranging from 0.8% – 1.58% which is normally guaranteed, and FHR/FHR18/36FDMR will be the factor causing total effective rate to rise or fall.

1-mth SIBOR0.28126%
3-mth SIBOR0.4375%
6-mth SIBOR%
12-mth SIBOR%
1-mth SOR%
3-mth SOR0.23%
6-mth SOR%