If you have a floating-rate home loan in Singapore, you've likely encountered the term SORA. Since the transition from SIBOR to SORA was completed in 2024, SORA has become the primary benchmark interest rate for Singapore-dollar mortgages. But what exactly is SORA, and how does it affect your monthly mortgage payments?
What is SORA?
SORA stands for Singapore Overnight Rate Average. It is the volume-weighted average rate of unsecured overnight interbank SGD transactions in Singapore. In simpler terms, it reflects the cost at which banks lend to each other overnight.
SORA is published daily by the Monetary Authority of Singapore (MAS) and has replaced SIBOR (Singapore Interbank Offered Rate) as the key benchmark interest rate for SGD loans.
Why Did Singapore Switch from SIBOR to SORA?
The transition from SIBOR to SORA was driven by global regulatory reforms following the LIBOR scandal. Key reasons include:
- Transparency: SORA is based on real transaction data, not bank estimates
- Robustness: More resistant to manipulation
- Liquidity: The overnight SGD market is highly liquid
- International alignment: Following similar transitions globally (SOFR in US, SONIA in UK)
The transition was completed in 2024, and all new floating-rate home loans are now pegged to SORA.
How SORA Affects Your Home Loan
Floating-rate home loans in Singapore are typically pegged to 1-month compounded SORA or 3-month compounded SORA. The formula is:
Home Loan Rate = Compounded SORA + Bank Spread
Example: 3-month SORA (2.85%) + 0.10% = 2.95%
1-Month vs 3-Month Compounded SORA
| Feature | 1-Month Compounded SORA | 3-Month Compounded SORA |
|---|---|---|
| Volatility | More volatile, responds faster to market changes | Less volatile, smoother rate movements |
| Lag effect | Minimal lag | 2-month lag in rate changes |
| Current rate (April 2026) | ~2.88% | ~2.85% |
| Best for | Borrowers who can tolerate short-term fluctuations | Borrowers preferring stability |
SORA Historical Trends (2023-2026)
Understanding SORA's historical movements helps predict future trends:
- Late 2023 - Early 2024: SORA rose from 3.5% to 3.8% (peak)
- Mid 2024 - Late 2024: SORA plateaued around 3.6-3.8%
- 2025: Gradual decline to 3.0-3.2% range
- 2026 (Current): Stabilised at 2.7-2.9% range
How SORA Changes Affect Your Monthly Payment
Even small SORA movements can significantly impact your monthly mortgage payment. Here's an example:
Example Scenario:
- Loan amount: S$500,000
- Loan tenure: 25 years
- Bank spread: 0.10%
| SORA Rate | Total Interest Rate | Monthly Payment | Annual Difference |
|---|---|---|---|
| 3.80% (peak) | 3.90% | S$2,610 | - |
| 2.85% (current) | 2.95% | S$2,360 | S$3,000 lower |
| 2.50% (forecast) | 2.60% | S$2,270 | S$4,080 lower |
SORA Forecast for 2026-2027
Economists surveyed by MAS expect SORA to remain in the 2.7% to 3.2% range for the remainder of 2026, with potential cuts in late 2026 if the US Federal Reserve reduces rates. Key factors influencing SORA:
- US Federal Reserve policy: Expected rate cuts in late 2026 - early 2027
- Singapore inflation: Projected to moderate to 2.0-2.5%
- Local liquidity conditions: Currently ample, keeping rates stable
- Global economic outlook: Moderate growth, no major shocks expected
Fixed Rate vs SORA-Pegged Floating Rate: Which Should You Choose?
When to Choose Fixed Rate
- You value payment certainty and predictability
- You believe interest rates will rise
- You have a tight monthly budget with little buffer
- You prefer not to monitor rate movements
When to Choose SORA-Pegged Floating Rate
- You expect rates to remain stable or decline
- You have income buffer to absorb potential increases
- You're willing to monitor market conditions
- You plan to keep the loan beyond the fixed-rate lock-in period
"With SORA expected to remain in a declining trend through 2027, floating-rate packages currently offer better value than fixed rates. However, borrowers should stress-test their budget at 4.0% to ensure affordability." β Mortgage Broker
How to Track SORA
MAS publishes SORA rates daily on its website. You can also find SORA rates on:
- MAS website (mas.gov.sg) β official source
- Major bank websites (DBS, OCBC, UOB)
- Financial news portals (Bloomberg, Reuters)
- Mortgage comparison sites
Refinancing from SIBOR to SORA
If you still have a SIBOR-pegged loan (rare after 2024), you should refinance to a SORA-based package immediately. SIBOR has been discontinued, and remaining SIBOR loans are transitioning to fallback rates that may be unfavourable.
Frequently Asked Questions
Is SORA better than SIBOR for borrowers?
Yes, SORA is more transparent and less volatile than SIBOR. However, SORA tends to be more responsive to overnight market conditions, which can lead to more frequent rate changes.
How often does my SORA-pegged loan rate change?
For 1-month compounded SORA, rates reset monthly. For 3-month compounded SORA, rates reset quarterly. The bank spread remains constant throughout the loan tenure (unless you refinance).
Can I switch from a SORA-pegged loan to a fixed rate?
Yes, most banks allow conversion between rate types. However, there may be a conversion fee (typically S$500-S$800), and a new lock-in period may apply.
What's the difference between SORA and the bank's board rate?
Board rates are set internally by each bank and are not transparent. SORA is a market-driven, published benchmark. SORA-pegged loans are generally more transparent and competitive than board rate loans.
How does SORA affect my HDB loan?
HDB concessionary loans are not pegged to SORA. They are pegged at 0.1% above the CPF OA rate (currently 2.6%). HDB loans are not affected by SORA movements.
Conclusion
SORA has become the cornerstone of Singapore's mortgage market. Understanding how it works, how it's calculated, and what influences its movements can help you make better decisions about your home loan. With SORA expected to trend downward through 2026-2027, floating-rate packages may offer significant savings over fixed rates.
Next Steps: Use our mortgage calculator to compare fixed vs floating rate scenarios. Check with your bank about refinancing options if you're on an outdated package.
Disclaimer: This article is for informational purposes only. SORA rates and forecasts may change. Always consult a licensed mortgage broker for personalised advice.