Everything you need to know about the SIBOR rate


sibor rates
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Using the Singapore Interbank Offered Rate (SIBOR) as a benchmark, banks can borrow money from each other in the Singapore market. Banks in Singapore use this interbank market to transfer funds and currencies to manage liquidity. SIBOR rate is the most commonly used base rate for calculating interest rates on home loans. After the SORA is implemented, this will all change.

In what way is the SIBOR calculated?

Singapore Banking association (SIBOR) sets SIBOR every day (ABS). The interest rates of 20 member banks are available to the public on a daily basis. If at least 12 member banks report their daily rates, the calculation is based on these interest rates. The upper and lower quartiles of the SIBOR are removed if more than 12 member banks are reporting for the day. There will be no SIBOR rare if fewer than 12 member banks say for the day.

Aspects Affecting Rates of SIBOR

Various factors can affect SIBOR rates:

· The impact of globalization on currency exchange rates

· Singapore’s banking, borrower, and equity fund transfer supply and demand

· Rates in the overnight market for US Federal Funds

· SIBOR for one month

· The most common SIBORs are the one-month and three-month SIBORs. The most common interest rates for home loans are the 1-month and 3-month SIBOR rates. As the SIBOR changes every month, it better gauges economic trends.

In situations where interest rates are expected to decline over the life of the loan, the 1-month SIBOR is a better option than the 3-month SIBOR. On the other hand, Borrowers can take advantage of today’s low-interest-rate environment and still lock in a low rate for three years.

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Difference between SIBOR and SOR

Swap Offer Rate (SOR) is based on the Singapore Dollar (SGD) and the United States Dollar (USD) USD forward rate and spot rate. The SOR represents the cost of obtaining SGD through the fictitious borrowing of USD and the subsequent use of a currency swap (FX swap).

SOR can be used as an alternative to the SIBOR; however, the two are influenced by different factors, even if their overall trends tend to be similar. Consequently, a rise in SIBOR implies an increase in SOR, regardless of the state of the economy at the time.

When it comes to home loans, the SIBOR is used, and when it comes to sme business loan, the SOR is typically used. Also, the two rates are calculated in a different ways. At least 10 Singaporean banks are used to calculate the SIBOR based on the interest rate that the banks charge one another for borrowing unsecured funds in Singapore.

Instead, SOR relies on the average of SGD and USD spot transaction rates to calculate its value. As a result, because it is now tied to the US economy, the SOR is no longer used for home mortgages.


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