SIBOR is generally more stable while SWAP tend to fluctuate more. However 3-month SWAP has recently stayed consistently lower than 3-month SIBOR for an extended period of time. SOR is also very reactive to currency exchange rates.

Which bank offers the best home loan deals?

Interest rates and spreads are not all that matter. Don't ignore the closing costs involved. Different banks can have different customized home loans for you. Don't be surprised if you will save more on a home loan that charges more interest because of the lesser closing costs involved. This is especially so if you know that you will refinance your home loan as soon as the lock in period has expired.

HDB loan or bank housing loan?

Our opinion is to always take a HDB concessionary loan if you are eligible for one. One of HDB's objectives is to to provide affordable housing for the people. While a bank is profit driven.

Negative Amortization?

Negative amortization for a housing loan occurs when your outstanding housing loan balance increases instead of decreases. There are a few instances that this can happen. Speak to us to learn more.

SOR Rates – Singapore Housing Loan Anomaly Paradox

In the most recent periods, SOR rates have been something that home buyers cannot stop talking about. Even home buyers with very reserved risk preferences have opened up their options by considering SOR housing loans. Property buyers and owners who are adverse to risk usually take up SIBOR housing loans without batting an eyelid.

The reality is that SOR has hit negative value. The anomaly scenario that banks and economists never thought could possibly happen has come true. This has effectively expanded the fluctuation band of SOR rates to an uncharted territory. And the broader the band for any period, the more unpredictable interest rates can be. However it is important to note that negative SOR is not a direct reflection of how well or how badly the Singapore economy is performing. Even at the peak of the subprime mortgage meltdown, SOR did not crash into negative territory.

While the volatility of SOR is of a particular concern, rock bottom SOR low rates are too attractive to fully ignore. This is especially so when the US Federal Reserves have pledged to maintain low interest rates for at least the next 2 years. On top of that MAS seem very comfortable to sustain the current strength of the Singapore dollar.

If you are in the dilemma of finding SOR rates attractive but also find the volatility unattractive, it is understandable. SOR has historically spent more time above SIBOR than below it. However, do note that SOR has been considerably lower than SIBOR for a noticeable period of time. And SOR has never gone negative historically but that is in fact a reality now. So do you still think that historical rates should be a key criteria in choosing between SIBOR and SOR pegged home loans?

Swap offer rate although attractive, is not a given that you will be able to obtain it. Different banks have different home loan assessment criteria. To obtain a SOR home loan, you have to obtain an approval first. Don’t make the mistake of spending so much time pondering over which loan to take up and finally find that you cannot obtain a SOR pegged home loan because you do not meet the lending bank’s qualifying criteria.

The best practice is to obtain an approval in principle housing loan before making a commitment to purchase a house. With this you will know exactly what you can and cannot afford. You can then select the best interest rate packages that matches your demands.

How can SOR be negative?

SOR rates are calculated with a complex formula. And just like every mathematical formula, the results from the formula depends heavily on the inputs that make up the SOR formula. In this case, the critical inputs are foreign interest rates which affects money flow, and in turn affects foreign currency rates.