Alwin Goh
If you’ve had a floating rate loan in Singapore over the past few years, you’ve probably received letters from your bank about switching from SIBOR to SORA. The transition officially wrapped up on December 31, 2024, marking the end of an era for Singapore’s financial markets. About 87,000 retail loans made the switch. But what does this actually mean for your monthly payments?
Key Takeaways
- SIBOR was discontinued after December 31, 2024 — all floating rate loans now reference SORA as the benchmark interest rate
- SORA is calculated from actual overnight lending transactions between banks, making it more transparent and harder to manipulate than SIBOR
- Banks applied an adjustment spread during the transition to keep your effective interest rate roughly similar to what you were paying before
- Monthly payments may still fluctuate because SORA refreshes regularly (every 1 or 3 months depending on your package)
- The 3-month compounded SORA is most common for home loans, offering a balance between stability and responsiveness to market conditions
What Was SIBOR and Why Did Singapore Phase It Out?
SIBOR (Singapore Interbank Offered Rate) served as the go-to benchmark for floating-rate loans for decades. Banks would submit estimates of what they believed it would cost to borrow from other banks, and those estimates got averaged out to produce SIBOR.
The problem? Those were estimates, not actual numbers.
This system ran into serious trouble globally when the LIBOR scandal broke in 2012. Major banks like Barclays, UBS, and Deutsche Bank were caught artificially inflating or deflating their rate submissions to profit from trades. Regulators across the US, UK, and EU imposed more than $9 billion in fines. Traders went to prison.
SIBOR wasn’t directly implicated the same way LIBOR was, but Singapore’s Monetary Authority of Singapore (MAS) found that 133 traders at 20 banks had attempted to influence benchmark rates inappropriately between 2007 and 2011. The writing was on the wall — any system built on subjective estimates carried inherent risks.
So Singapore joined a global push toward transaction-based benchmarks. SORA became the answer.
How SORA Works Differently
SORA stands for Singapore Overnight Rate Average. Instead of relying on what banks think borrowing might cost, it’s calculated from what banks actually paid to borrow from each other overnight.
Here’s the process:
Every business day, reporting banks submit data on their borrowing transactions made between 8 am and 6.15 pm. MAS validates this information and calculates a volume-weighted average. The rate gets published at 9 am the next business day on the MAS website.
Think of it like this: SIBOR was asking banks “what do you estimate your borrowing costs are?” SORA asks “what did you actually pay yesterday?”
This makes SORA more robust against manipulation. You can’t fake an actual transaction the way you can inflate an estimate.
Forward-Looking vs Backward-Looking
One key difference catches many borrowers off guard. SIBOR was forward-looking — you knew at the start of your interest period exactly what rate you’d pay. SORA is backward-looking. Your rate gets calculated based on overnight transactions that already happened, compounded over 1, 3, or 6 months.
For most homeowners with a 3-month SORA package, this means your interest rate only becomes fully known when the payment period ends. Banks handle this by using the previous period’s compounded rate or a lookback mechanism, so you still have reasonable visibility into what you’ll owe.
The Three Types of Compounded SORA
Banks don’t peg your loan to the raw daily overnight rate. That would create too much volatility. Instead, they use compounded averages:
- 1-Month Compounded SORA refreshes every month. It responds faster when rates drop, but also climbs quicker when rates rise. Good for borrowers who believe rates will keep declining.
- 3-Month Compounded SORA is the most popular choice for home loans. It smooths out short-term fluctuations over 90 days, giving you more predictable monthly payments. Most major banks offer this as their standard floating rate product.
- 6-Month Compounded SORA offers even more stability but reacts slower to market changes. Less common for residential mortgages.
As of December 2025, the 3-month compounded SORA sits around 1.25%, down significantly from its peak near 3.7% in 2023. The decline reflects broader global trends as central banks ease monetary policy.
How the Transition Aimed to Be “Neutral” for Borrowers
When banks converted SIBOR loans to SORA, they didn’t just swap one rate for another. SIBOR historically traded higher than SORA because it included term and credit risk premiums that an overnight rate doesn’t capture.
To prevent borrowers from suddenly paying less (or more) purely due to the benchmark change, banks added an adjustment spread.
The formula worked like this:
New Rate = 3-Month Compounded SORA + Your Original SIBOR Margin + Adjustment Spread
The adjustment spread bridged the gap between your old SIBOR-based rate and the new SORA-based calculation. Regulators designed it to be economically neutral — your monthly payment shouldn’t have jumped dramatically just because of the benchmark switch.
Two Approaches to the Adjustment Spread
During the active transition period (September 2023 to April 2024), borrowers who switched voluntarily got a “spot spread” based on the average difference between SIBOR and compounded SORA over the preceding three months.
Borrowers who didn’t take action got automatically converted in June 2024 using a 5-year historical median spread. This approach was fixed in advance, giving people certainty about what would happen if they simply waited.
Both methods aimed to preserve the economic value of existing loan contracts. The Steering Committee for SOR & SIBOR Transition (SC-STS) worked with banks to waive fees and exempt converted loans from needing fresh TDSR (Total Debt Servicing Ratio) calculations.
Why Your Monthly Payments Might Still Change
Even with a neutral transition, your monthly instalments can fluctuate. SORA itself moves based on several factors:
- Singapore’s economic outlook plays a role. When growth slows and inflation stays low, overnight lending rates tend to decline.
- Global monetary policy matters enormously. The US Federal Reserve’s decisions ripple through to Singapore because of how interconnected financial markets are. When the Fed cuts rates, SORA typically follows within weeks or months.
- Liquidity conditions in Singapore’s banking sector affect how much banks charge each other for overnight funds.
Since SORA dropped from above 3% in early 2025 to around 1.25% by December, many borrowers have seen their floating rate mortgage payments decrease noticeably. But the opposite can happen too. If inflation resurges or global conditions tighten, SORA will rise — and so will your monthly payment.
Fixed Rate vs SORA-Based Floating Rate: Which Makes Sense Now?
With SORA at relatively low levels, some borrowers wonder if they should lock in a fixed rate instead.
Fixed rate packages typically range from 2.4% to 2.9% for a 2-year term. You get certainty: your monthly payment stays constant regardless of what happens to benchmark rates.
SORA-based floating rates currently offer lower costs — many packages sit around 1.5% to 2% including the bank’s spread. But you accept the risk that rates could climb.
Your decision depends on risk tolerance. If you prefer predictable budgeting and believe rates might rise, fixed offers peace of mind. If you’re comfortable with some variability and think rates will stay low or fall further, floating lets you benefit from those conditions.
What This Means for Personal Loans and Other Credit
While much of the SIBOR-to-SORA discussion focuses on mortgages, the benchmark change affects other loan products too. Business loans, commercial property financing, and some personal credit lines that referenced SIBOR have transitioned to SORA-based pricing.
For unsecured personal loans — the type offered by licensed money lenders like Crawfort — the benchmark change has less direct impact. Personal loan rates from licensed money lenders are typically fixed for the loan term and governed by regulatory caps under Singapore’s Moneylenders Act, which limits nominal interest to a maximum of 4% per month.
Still, broader interest rate environments influence the cost of funds for all lenders. When overnight rates drop, borrowing costs across the financial system tend to ease. This can create more competitive conditions even for fixed-rate personal loan products.
Frequently Asked Questions
Can I still get a SIBOR-based loan?
No. SIBOR was discontinued after December 31, 2024. All new floating rate loans in Singapore now reference SORA. If you had an existing SIBOR loan, your bank would have converted it to a SORA-based package by mid-2024.
Did I need to do anything for the transition?
Most borrowers were automatically converted. Banks reached out with options between September 2023 and April 2024, but even if you took no action, your loan was switched to the SORA Conversion Package with a fixed historical adjustment spread.
Will my monthly payment be exactly the same after the switch?
Not necessarily. The adjustment spread aimed to make the transition economically neutral at the moment of conversion. But because SORA fluctuates, your payments will change over time as the benchmark moves up or down.
Is SORA more stable than SIBOR was?
Generally yes. Because compounded SORA averages daily rates over 1, 3, or 6 months, it smooths out short-term volatility. SIBOR could change abruptly on a single reset day based on that day’s bank submissions. SORA’s backward-looking calculation provides more gradual adjustments.
How often does my SORA-pegged loan rate change?
It depends on your package. A 1-month SORA loan refreshes monthly. A 3-month SORA loan (the most common) adjusts every quarter. Check your loan documents or ask your bank which compounding period applies to you.
What happens if SORA rises significantly?
Your monthly payment will increase. Unlike fixed rate loans, floating rate products expose you to interest rate risk. Before committing to a SORA-based loan, make sure you can comfortably afford higher payments if rates climb.
Who administers SORA?
The Monetary Authority of Singapore (MAS) calculates and publishes SORA daily. MAS has administered this benchmark since 2005, though it only became the primary mortgage reference rate after the SIBOR phase-out.
Where can I check the current SORA rate?
MAS publishes SORA on their official website by 9 am each business day. Most banks also display current 1-month and 3-month compounded SORA rates on their mortgage pages.
