SINGAPORE (July 13): OCBC Bank has launched Singapore’s first home loan package that references the Singapore Overnight Rate Average (SORA). This is another milestone for the bank as the banking and finance industry transitions towards adopting SORA as a new interest rate benchmark for the Singapore Dollar cash and derivatives markets.
The SORA is the volume-weighted average rate of unsecured overnight interbank Singapore Dollar transactions brokered in Singapore daily from 9am to 6.15pm. It has been published by the Monetary Authority of Singapore (MAS) since July 1, 2005.
The OCBC 90-day SORA home loan is available to buyers with completed private properties, at a minimum loan size of $1 million.
SORA is a backward-looking overnight rate as compared to a forward-looking reference rate commonly used for floating home loan packages in Singapore, such as Singapore Interbank Offered Rate (SIBOR) where the interest rate is determined at the start of the interest period.
Unlike the three-month SIBOR home loan package, where rates are reviewed every three months, and instalments to increase or decrease depending on the rates, rates are calculated based on the simple average of the daily SORA rates over the past 90 calendar days.
At the start of every interest period - customers are given advance notice of the SORA-based interest rate to be paid for the coming month.
See also: New Key Summary 123
The loan package has a one-year lock-in period, where customers can opt to switch for another home loan package after the year-long period is up.
“With this launch, we are offering a more comprehensive range of home loan options. As this product is the first-of-its-kind in the market, we would like to give customers the opportunity to discover more about this product, and to better understand SORA as a new reference interest rate,” says Sunny Quek, head of consumer financial services Singapore, at OCBC Bank.
Shares in OCBC Bank closed 6 cents lower, or 0.6% down, at $9.19 on Monday.
