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Thread: SOR or SIBOR?

  1. #1
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    Default SOR or SIBOR?

    hi guys,

    I have looked at packages from StanChart which is tied to the SIBOR.

    It's basically

    Year 1 1.5%
    Year 2 Sibor + 1.35
    Year 3 Sibor + 1.35

    The SIBOR that they used for reference was 0.686%.
    -----------------------------
    However, my banker from UOB countered that SIBOR may go up if the econ recovers and claims that his SOR linked loan is better.

    The SOR, I believe to be the board rate package.

    Year 1 SOR + 0.65% = 1.35%
    Year 2 SOR + 0.85% = 1.55%

    The current SOR is 0.70%.
    -----------------------

    Now, I know many of you have advised that a package linked to the SIBOR is more transparent and prudent. However, his rates do seem attractive. The only problem is how frequent do banks adjust their SORs / board rates? What's your advise guys? Do banks adjust their board rates at the slightest twitch of the econ improving?

    I'm pretty confused. Please advise me.

  2. #2
    Just my 2 cent worth..

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    in my opinion, since sibor rate is the market rate and is transparent.. why choose board rate which has addition factor of bank decision on top of the sibor rate..

    [B]
    What is SIBOR?[/B]
    It stands for the Singapore Interbank Offered Rate.

    Where do you see this?

    In bank statements explaining how your mortgage rates are determined.

    What does it mean?

    It refers, more or less, to repayments on your loans, because Sibor affects the mortgage rate.

    Sibor is the rate at which banks lend to one another. When it falls, so do rates for variable or Sibor-linked mortgages. When the Sibor rises, you have to fork out more.

    Sibor also gives a rough indication of where deposit and savings account rates at banks might be headed, as it is influenced partly by the supply and demand for funds in the Singapore interbank market.

    When Sibor is low, it is cheaper for foreign banks, which have a smaller deposit base than local ones do, to borrow funds from the interbank market for their lending activities.

    When this happens, the foreign banks are less likely to offer higher fixed deposit rates to attract Singaporeans to park cash with them.

    But when liquidity in the market is tight and interbank rates rise, local banks will offer more attractive rates to convince Singapore savers not to switch to foreign rivals.

    Why is it important?

    [COLOR="blue"]Sibor is a key component used by banks in setting their home loan rates.[/COLOR]
    A blend of different interest rates - such as one-month, three-month and even 12-month Sibors - is typically used by banks to set fixed or variable rates for home loans.

    The three-month Sibor is a common benchmark rate used by the banks to adjust their deposit rates. By monitoring it, you can get an indication of where banks are headed next with their fixed deposit and savings account rates.

    Sibor is also used to set rates for so-called transparent mortgage packages offered by the three local banks as well as Standard Chartered, HSBC and Citibank.

    These are linked directly to Sibor or another publicly disclosed rate, such as the Central Provident Fund (CPF) rate or the swap offered rate (SOR).

    [COLOR="Blue"]SOR is made up of Sibor plus a bank's lending costs, and is currently at about 1.39 per cent, down from 3 per cent a year ago.[/COLOR]
    In a falling interest rate environment, mortgage rates linked to Sibor or SOR will also trend downwards.

    Sibor tends to track the United States Federal Reserve funds rate, which has been slashed in recent weeks to 2.25 per cent as the Fed attempts to stave off an economic recession in the US.

    Sibor has plummeted from 2.94 per cent to 1.31 per cent over the past year, and economists say it might not have bottomed out yet.





    Quote Originally Posted by miya
    hi guys,

    I have looked at packages from StanChart which is tied to the SIBOR.

    It's basically

    Year 1 1.5%
    Year 2 Sibor + 1.35
    Year 3 Sibor + 1.35

    The SIBOR that they used for reference was 0.686%.
    -----------------------------
    However, my banker from UOB countered that SIBOR may go up if the econ recovers and claims that his SOR linked loan is better.

    The SOR, I believe to be the board rate package.

    Year 1 SOR + 0.65% = 1.35%
    Year 2 SOR + 0.85% = 1.55%

    The current SOR is 0.70%.
    -----------------------

    Now, I know many of you have advised that a package linked to the SIBOR is more transparent and prudent. However, his rates do seem attractive. The only problem is how frequent do banks adjust their SORs / board rates? What's your advise guys? Do banks adjust their board rates at the slightest twitch of the econ improving?

    I'm pretty confused. Please advise me.

  3. #3
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    Quote Originally Posted by Douk
    in my opinion, since sibor rate is the market rate and is transparent.. why choose board rate which has addition factor of bank decision on top of the sibor rate..

    [B]
    What is SIBOR?[/B]
    It stands for the Singapore Interbank Offered Rate.

    Where do you see this?

    In bank statements explaining how your mortgage rates are determined.

    What does it mean?

    It refers, more or less, to repayments on your loans, because Sibor affects the mortgage rate.

    Sibor is the rate at which banks lend to one another. When it falls, so do rates for variable or Sibor-linked mortgages. When the Sibor rises, you have to fork out more.

    Sibor also gives a rough indication of where deposit and savings account rates at banks might be headed, as it is influenced partly by the supply and demand for funds in the Singapore interbank market.

    When Sibor is low, it is cheaper for foreign banks, which have a smaller deposit base than local ones do, to borrow funds from the interbank market for their lending activities.

    When this happens, the foreign banks are less likely to offer higher fixed deposit rates to attract Singaporeans to park cash with them.

    But when liquidity in the market is tight and interbank rates rise, local banks will offer more attractive rates to convince Singapore savers not to switch to foreign rivals.

    Why is it important?

    [COLOR="blue"]Sibor is a key component used by banks in setting their home loan rates.[/COLOR]
    A blend of different interest rates - such as one-month, three-month and even 12-month Sibors - is typically used by banks to set fixed or variable rates for home loans.

    The three-month Sibor is a common benchmark rate used by the banks to adjust their deposit rates. By monitoring it, you can get an indication of where banks are headed next with their fixed deposit and savings account rates.

    Sibor is also used to set rates for so-called transparent mortgage packages offered by the three local banks as well as Standard Chartered, HSBC and Citibank.

    These are linked directly to Sibor or another publicly disclosed rate, such as the Central Provident Fund (CPF) rate or the swap offered rate (SOR).

    [COLOR="Blue"]SOR is made up of Sibor plus a bank's lending costs, and is currently at about 1.39 per cent, down from 3 per cent a year ago.[/COLOR]
    In a falling interest rate environment, mortgage rates linked to Sibor or SOR will also trend downwards.

    Sibor tends to track the United States Federal Reserve funds rate, which has been slashed in recent weeks to 2.25 per cent as the Fed attempts to stave off an economic recession in the US.

    Sibor has plummeted from 2.94 per cent to 1.31 per cent over the past year, and economists say it might not have bottomed out yet.
    Thank you bro for your detailed reply! I didn't know it has plummeted over the year.

  4. #4
    Just my 2 cent worth..

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    Quote Originally Posted by miya
    Thank you bro for your detailed reply! I didn't know it has plummeted over the year.

    no prob. i cut and paste the details from google search..

  5. #5
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    Default Consider other features of packages too

    I have also been seen these 2 packages but you really have to consider other things apart from the rates.

    Btw, banks cannot adjust SOR or SIBOR.

    Firstly, the SOR is not the board rate, SOR is also tansparent to the public like the SIBOR and as such, SIBOR and SOR move in tandem to each other, sometimes SOR is higher than SIBOR and sometimes SIBOR is higher than SOR, but they are really not much different as you already stated that the SIBOR is 0.686% and SOR is 0.7%. The difference though, is the "spread", like the 0.65%, 0.85% and 1.35%, etc. and other features in these loan packages like the lock-in periods and redemption penalty apart from the rates.

  6. #6
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    Quote Originally Posted by bumblebee
    I have also been seen these 2 packages but you really have to consider other things apart from the rates.

    Btw, banks cannot adjust SOR or SIBOR.

    Firstly, the SOR is not the board rate, SOR is also tansparent to the public like the SIBOR and as such, SIBOR and SOR move in tandem to each other, sometimes SOR is higher than SIBOR and sometimes SIBOR is higher than SOR, but they are really not much different as you already stated that the SIBOR is 0.686% and SOR is 0.7%. The difference though, is the "spread", like the 0.65%, 0.85% and 1.35%, etc. and other features in these loan packages like the lock-in periods and redemption penalty apart from the rates.
    Yup ... this sounds more like wat a banker fren shared with me ... SOR has an additional component (& it's not exactly bank lending rate or s/thg) ... it's got to do with some exchange factor ... which probably explains why most pp think SIBOR is more "transparent" & easier to understand bah

  7. #7
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    To hedge yourself against any unexpected rise in interest rate, consider to peg 50 % of your loan against sibor and 50 % fixed rate.

    That way when interest goes up you are hedge against your fixed rate and gain on your sibor rate if interest rate stays low or ease further.

  8. #8
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    Quote Originally Posted by oilman
    To hedge yourself against any unexpected rise in interest rate, consider to peg 50 % of your loan against sibor and 50 % fixed rate.

    That way when interest goes up you are hedge against your fixed rate and gain on your sibor rate if interest rate stays low or ease further.
    Your method is interesting. It is like buying insurance. However, insurance always come with a premium. I am a risk taker, so will go for SIBOR.

  9. #9
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    Default Negotiate

    One thing that people don't do when they apply for loans is negotiate. It is not like buying something at a supermarket. Loans are tailored to each individual. If you choose a generic loan package the loan officer has less to do, that's all.

    You should not have to choose between SOR or SIBOR. Most packages allow you to switch between the 2 without any charges. If your bank charges you, they are being mean and you can file a complaint to waive the charges. No guarantees, though.

    I think the StanChart offer of +1.35% is [B][I]VERY [/I][/B]high. Rates now should be no more than 1.3% [B]total[/B].

  10. #10
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    Quote Originally Posted by oxboy99
    One thing that people don't do when they apply for loans is negotiate. It is not like buying something at a supermarket. Loans are tailored to each individual. If you choose a generic loan package the loan officer has less to do, that's all.

    You should not have to choose between SOR or SIBOR. Most packages allow you to switch between the 2 without any charges. If your bank charges you, they are being mean and you can file a complaint to waive the charges. No guarantees, though.

    I think the StanChart offer of +1.35% is [B][I]VERY [/I][/B]high. Rates now should be no more than 1.3% [B]total[/B].
    How to negotiate can please share? Thx. No need to choose between SOR or SIBOR, then wat other options? Izit like wat oilman said, half-half mix for the entire load amount? Back to Miya's question, so if not more than 1.3% in total, then is the option she mentioned SOR + ... ??

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