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Thread: SIBOR vs SOR

  1. #1
    Join Date
    May 2011
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    5

    Default SIBOR vs SOR

    Good Day everyone,

    Having read the information provided earlier on HDB Loan Structures, I am now here again to share some further information on the Housing Loan rates, Hope that these information will be beneficial to all.

    Over the past few years, as consumers demand for more transparency and “fair” rates for their home loans, the popularity of Singapore Interbank Offered Rate (SIBOR) & Swap Offer Rate (SOR) pegged packages is increasing and major financial institutions are structuring their loans against these 2 market rates.

    However, different FIs have different preferences in structuring against either the SIBOR or SOR. The list of the major FIs and their loan structures:

    SIBOR
    1) Standard Chartered Bank
    2) Citibank
    3) HSBC
    4) DBS/POSB
    5) OCBC
    6) Maybank

    SOR
    1) UOB
    2) CIMB

    Historically, SIBOR is more stable in nature and SOR is much more volatile. Graphical comparison of the volatility of SIBOR vs SOR, which would reflect a clearer picture of the nature of the 2 market rates:



    SIBOR VS SOR

    Singapore Interbank Offered Rate (SIBOR)

    Singapore Interbank Offered Rate is fixed by the Association of Banks in Singapore. It represents the unsecured funds/rates that banks and financial institutions in Singapore lend to each other. Local housing loan interest rates track movements in the SIBOR.

    Singapore Swap Offer Rate (SOR)

    Swap offer rate is fixed by the Association of Banks in Singapore. It represents the average cost of funds used by banks in Singapore for commercial lending. In Singapore, most banks offer housing loan packages pegged to either SIBOR or SOR.
    SIBOR is most likely to be more stable as compared to SOR as the latter is influenced by a Forex component, which in the last few years, have been badly affected due to the erratic world economy and international exchange market. Although SOR rates have been relatively lower than SIBOR rates recently, SOR has gone through rapid movements and at times, has a much higher rate than SIBOR. This makes SIBOR more “stable” for those who are aware of the unpredictable economic changes and on par with market conditions.

    Question :SOR will rise faster than SIBOR when interest rate rise?
    In the event of increasing US Fed rate which will cause both SIBOR and SOR to increase. However, when interest rate rises, US dollar will also appreciate in demand. Thus SOR (which is pegged to US Dollar movement ) will increase faster than SIBOR(which is not pegged to USD)

    Dear readers, do reply to this post or drop me a mail or message if you have any queries or additional information to share.

  2. #2
    Join Date
    Aug 2009
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    2,988

    Default

    SOR does not represent "average costs of funds" blah blah..

    Being volatile does not mean it's not good. Ur post has an unfavorable tune against SOR. SOR fixing changes every day , vey volatile, but it has been consistently below SIBOR3M for the last one year.

    Whether Sibor or SOR to take depends on your view of the market. If u believe US rate will be low for an extended period, you should profit from this. If you believe MAS "gradual appreciation" policy is going to last, you should profit from it too.

    It's pointless to take a "stable" but high rate.

  3. #3
    Join Date
    May 2011
    Posts
    5

    Default Re: SIBOR vs SOR

    Thank you for your contribution to further analyze the information in this post for the benefit of the others. I would like to explain that there is no explicit statement representing on our views that SOR, being more volatile is a “worse-off” rate. Of course, this is a very subjective issue for each individual’s preference. If you would like more information on the structuring of SOR, you can check with the banks on the mechanism of the structuring, if in doubt.
    Secondly, looking at the 1 year historical chart of SOR against SIBOR would not be a fair comparison to judge that SOR or SIBOR is a better choice, vice versa. Clients, firstly, need to be aware of why is SOR being consistently lower than SIBOR only during these past couple of years and the risks nature associated with it.
    Monetary and fiscal polices, US economic indicators, would pave the way for the rates expectations.
    Thus, it depends on consumers’ mortgage portfolio, financial objectives and other factors to determine which is a better loan structure to go for. One man’s meat is another man’s poison. We do love SOR as well, for the short term that is.. J
    For example, BUC (building under construction) with TOP expected end of 2015.
    Thanks again, amk for your contributions and hope to hear from you soon. Welcome anyone out there to share their views or queries.
    Cheers!!

  4. #4
    Join Date
    Oct 2010
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    4,739

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    You have historical data for SIBOR & SOR for 10 years?
    1M,3M SIBOR and 1M,3M SOR.

    We are not borrowing at SIBOR or SOR rates.
    but at SIBOR + xxx% and SOR + xxx%.

    I so far manage to get from 2008-04 data daily for SOR and SIBOR rates
    and so far, 1M SIBOR + 0.65% is lower than 3M SOR + 0.65% (not offered now)
    The average difference is 0.14% from 2008-04 to 2011-05.

    if compare 1M SIBOR + 0.65% (Citibank) versus 3M SOR + 0.85 (CIMB),
    1M SIBOR + 0.65% is lower with average of 0.34%.
    The time period again is from 2008-04 to 2011-05.

    Anybody can point links where to get 10 year data.

  5. #5
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    I have the whole history data. The spread between SIBOR and SOR in fact was much higher. From 2008 onwards in fact the spread narrowed exactly because of the crisis.

    The choice of Sibor and Sor is very much a personal decision based on your view of the market. Dun forget aggressive SGD appreciation is only a recent trend. US gov used to favor " a strong dollar" for real. But time changed. The key point here is US. Uncle ben is using unconventional methods, resulting in unconventional rates.

    I wasn't using the 1Y comparism to say SOR is better. I just wanted to clarify that SOR rate is not all bad, as the 1st post seemed to be suggesting.

    I personally have loans on both Sibor and SOR.

    Btw hopeful my data source is bloomberg. I see if i can find from ABS public web sites. For now I think ur sibor + 65 throughout is a VERY good deal.

  6. #6
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    A few members asked me for the 10Y Sibor/Sor data. I attached the screen shot here. To help your comparism, it shows the difference between SIBOR1M/SOR3M and SIBOR3M/SOR3M.

    As u can see from the 10Y graph, SIBOR3M and SOR3M historically are very close throughout 2001-2005. From 2006 SOR starts to be significantly higher than SIBOR, it spiked at 2009 when lehman crashed and lending froze. Right after that US started its massive QEs and loose 0 rate policy, SOR goes down steadily.

    For the SIBOR1M rate, u can see it's almost exclusively lower than SOR3M. It should be, a 1M lending rate *should* be lower than 3M. Only until now, SIBOR1M higher than SOR3M because the US rate is so low, and MAS seems to be *determined* to appreciate SGD, SOR3M started to be higher than SIBOR1M, but just marginally. (just 5bps)

    Overall one thing you should notice, both rates by and large track each other, with SOR far more heavily influenced by US rates and SGD stand. The difference in my view is largely marginal. SOR staying low is entirely a result of US monetary policy, and as of now market expects it to continue for a while. It's your judgment whether you should take advantage of this.

  7. #7
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    Thanks alot.
    That's a nifty tool you have here.
    Can see the histogram how many times (SIBOR-SOR) is +ve or -ve.

    I dont suppose Bloomberg will let you (1M SIBOR+0.65) - (3M SOR+0.65)
    or export data to Excel .
    Sorry, give a man 10cents and he asked for a buck.

  8. #8
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    I read that QE3 is coming soon. Another round of inflation Will the rates continue to stay so low?

  9. #9
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    Default

    1 mth SOR drops to 0.18 today.

  10. #10
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    Quote Originally Posted by hopeful
    I dont suppose Bloomberg will let you (1M SIBOR+0.65) - (3M SOR+0.65)
    or export data to excel
    It will but I won't

    Btw ( x + 0.65 ) - ( y + 0.65 ) == x - y isn't it ?

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