The Business Times

Six in 10 in Singapore open to Sora-based loans, products: poll

Published Tue, Apr 6, 2021 · 12:56 PM

MORE than six in 10 respondents in a recent UOB poll said they are open to choosing Singapore Overnight Rate Average (Sora)-based products.

This is due to the interest rate benchmark's stability, according to the online survey which polled more than 300 individuals in January. The respondents also said that certainty and transparency were among their key considerations when choosing a loan package.

However, as consumers are still familiarising themselves with Sora-pegged products, seven in 10 (70 per cent) said they would only apply for one within six to 12 months of the product becoming available.

Consumers will soon have to familiarise themselves with Sora as financial institutions, including banks, will cease to reference the Swap Offer Rate (SOR) in new products by end-April this year.

As announced by the Association of Banks in Singapore last year, the use of the Singapore Interbank Offer Rate (Sibor) in new loan products will also cease by end-September 2021 to reinforce the shift for the Singapore dollar financial markets to a Sora-centred interest rate market.

In support of the transition, UOB launched Singapore's first dual tranche Sora-SOFR corporate loan to CapitaLand in September last year, and the bank's first Sora-based residential and commercial property loan solutions in December the same year. The latter's interest rates will be reviewed and set every three months. For example, a homeowner or small business who begins their loan in January will have clarity on their interest rates and repayment amount until April, when the next rate review will take place.

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According to UOB, this allows Sora to offer more stability as compared to SOR and Sibor, which are forward-looking term rates.

The loans also include lock-in periods of one year, after which customers can freely reprice or sell their property. They can also choose between combination packages using both Sora and a fixed interest rate, one with a fixed interest rate during the lock-in period followed by a three-month compounded Sora for the remainder of the loan tenor.

Customers can apply for their Sora-pegged home loans online using MyInfo.

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