Sibor or SOR? Now you can have them both

ANZ Bank offers unique floating rate mortgage

ANZ Bank has launched a new floating rate home loan, believed to be the first of its kind here.

The bank claims it could reduce the anxiety of homeowners because the loan is pegged to at least two reference rates, unlike the banking norm in Singapore where home loans are usually pegged to only one.

Floating rate home loans are usually pegged to either the Singapore Interbank Offered Rate (Sibor) or the Swap Offer Rate (SOR).

Sibor is the rate at which banks in Singapore lend to one another, whereas SOR refers to the average cost of funds used by banks here for commercial lending.

As most housing loan interest rates track movements in the Sibor or SOR, this means that when the respective rates shift upwards or downwards, the interest rates of the home package will move in the same direction.

Analysts say that for homeowners buying properties over long-term periods, it is advisable to choose a loan with fixed rates or Sibor-pegged home package, as Sibor rates are known to be relatively more stable than SOR rates.

However, for home buyers with more aggressive risk appetite and who are investing over a shorter time horizon, they may consider the SOR-pegged packages at a time when the SOR rates are lower and more attractively-priced than Sibor rates.

Source : Today – 20 Aug 2010

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