SORA Rates Explained: How Singapore's Mortgage Benchmark Affects Your Home Loan

What is SORA and Why It Matters for Your Mortgage

SORA (Singapore Overnight Rate Average) is the volume-weighted average rate of actual borrowing transactions in Singapore's unsecured overnight interbank SGD cash market.[1][2] Administered by the Monetary Authority of Singapore (MAS) since 2005, SORA has become the primary benchmark for home loan pricing since 2022, replacing the older SIBOR and SOR rates that were phased out by 2024.[4][5]

If you're shopping for a home loan or refinancing an existing mortgage in Singapore, understanding SORA is essential. This benchmark rate directly affects your monthly mortgage payments, and knowing how it works can help you make better financial decisions. At Homejourney, we're committed to helping you navigate these decisions with transparency and verified information, ensuring you can compare rates from all major banks—DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, and more—in one trusted platform.[1]

The shift to SORA represents a significant improvement for borrowers. Unlike its predecessors, SORA is backward-looking, calculated based on actual transactions rather than predictions, making it a more reliable reflection of real market conditions.[2] This means your interest rate will be more stable and predictable compared to older benchmarks.

How SORA is Calculated: The Daily Process

Understanding how SORA rates are calculated helps you grasp why your mortgage payments might change month to month. The calculation process is rigorous and transparent, overseen by Singapore's financial regulator.

Each business day, reporting banks submit data on all eligible transactions traded between 8am and 6:15pm.[1][5][6] MAS then validates this data and calculates the volume-weighted average rate of all eligible transactions. The resulting daily SORA rate is published at 9am the next business day on the MAS website, ensuring complete transparency.[1]

Most home loans use either 1-month compounded SORA or 3-month compounded SORA, meaning your interest rate is based on an average of daily SORA rates over that period rather than a single daily rate.[1][2] This averaging approach reduces volatility in your monthly payments. For example, if one day's SORA spikes due to market conditions, it won't dramatically increase your payment since it's averaged with other days in the month.

The key advantage: because SORA is based on actual transactions rather than bank predictions, it's considered a near risk-free rate that accurately reflects real market borrowing costs.[2]

3-Month vs 6-Month Compounded SORA: Which Should You Choose?

Banks typically offer home loans pegged to either 3-month or 6-month compounded SORA. Understanding the difference helps you decide which aligns better with your risk tolerance and financial situation.

3-Month Compounded SORA is the most common option offered by Singapore banks.[1] Your interest rate resets quarterly (every three months) based on the average SORA over that period. This means your monthly payment can change more frequently—up to four times per year—but you benefit from rates that more closely track current market conditions.

6-Month Compounded SORA resets less frequently, providing more payment stability. Your rate adjusts only twice per year, which can be psychologically easier to manage. However, you may pay slightly higher rates since banks compensate for the longer fixed period.

The chart below shows recent SORA trends to help you understand how rates have moved and what to expect with different compounding periods:

From the chart above, you can see how SORA has fluctuated over recent months. If you prefer predictability, 6-month SORA might suit you better. If you want to benefit from falling rates quickly, 3-month SORA offers faster adjustments. Track live 3-month and 6-month SORA rates updated daily on Homejourney's bank rates page to monitor trends before making your decision.

How Bank Spreads Work: Your Total Mortgage Rate

Your actual mortgage interest rate isn't just SORA—it's SORA plus a bank spread (also called margin). Understanding this is crucial for comparing offers across banks.

A typical SORA-based mortgage might be structured like this: 3-Month SORA + 0.80% p.a. for years 1-2, then 3-Month SORA + 1.00% p.a. from year 3 onwards.[1] If 3-Month SORA is currently 4.20%, your all-in rate would be 5.00% for the first two years, then 5.20% from year three.

Banks use promotional spreads to incentivize borrowers in the early years. The lower spread (0.80%) is your reward for committing to the bank. After the lock-in period (typically 2 years), the spread increases to recoup the bank's costs and risk.[1] This is standard practice across DBS, OCBC, UOB, HSBC, and other major banks.

Key point: always compare the total rate, not just the spread. A bank offering SORA + 0.70% might seem cheaper than SORA + 0.80%, but if the first bank's SORA calculation method is different or less favorable, you could end up paying more. This is why comparing rates from all major banks side-by-side on Homejourney is essential—you see the full picture, not just individual components.

SORA vs SIBOR vs SOR: Why the Switch Happened

If you have an older mortgage or you're researching historical rates, you may encounter references to SIBOR (Singapore Interbank Offered Rate) or SOR (Swap Offer Rate). Understanding why Singapore switched to SORA explains why your options today are different.

SIBOR was forward-looking—banks predicted what rates would be in the future and set SIBOR based on those predictions.[1] This introduced an element of guesswork into your mortgage calculation. SORA is backward-looking—it's calculated from actual transactions that already happened, making it more objective and reliable.[1][2]

The global financial industry has moved toward risk-free rates like SORA because they're based on real market activity rather than predictions. This makes borrowing costs more transparent and fair for consumers. If you had a SIBOR or SOR loan before 2024, your bank automatically converted you to a SORA-based package with an adjustment spread to keep your costs comparable.[3]

How SORA Affects Your Monthly Payments

The most practical question: how does SORA actually impact what you pay each month? Let's walk through a concrete example.

Suppose you borrow $500,000 at 3-Month SORA + 0.80% over 25 years. If 3-Month SORA is 4.20%, your all-in rate is 5.00%. Your monthly payment would be approximately $2,966.

Three months later, if 3-Month SORA rises to 4.50%, your new all-in rate becomes 5.30%. Your monthly payment increases to approximately $3,050—an additional $84 per month. Conversely, if SORA falls to 3.90%, your rate drops to 4.70%, and your payment decreases.

This variability is why understanding your risk tolerance matters. With floating SORA rates, your payment can change quarterly. Some borrowers prefer this flexibility; others find fixed rates more comfortable despite potentially higher initial costs.

To calculate exactly how SORA changes would affect your specific situation, use Homejourney's mortgage calculator to see instant payment estimates based on different SORA scenarios. This helps you plan your budget realistically.

Comparing Bank Rates: What to Look For Beyond SORA

When comparing mortgage offers, SORA is just one component. Here's what else matters:

Lock-in Period: Most banks offer 2-year lock-in periods. Switching before this ends incurs penalties. Confirm this duration before committing.
Repricing Options: Banks must notify you at least a month before rates change, giving you time to refinance elsewhere if you find better terms.[1] Verify your bank offers this flexibility.
Processing Fees: These vary by bank and can range from $0 to $1,500+. Factor this into your total cost comparison.
Valuation Fees: Property valuation costs differ across banks. Some offer discounts or waivers for competitive borrowers.
Insurance Requirements: Mortgage insurance (mortgage reducing term insurance) is optional but recommended. Compare premiums across banks.
Early Repayment Penalties: Some banks charge fees if you repay early; others don't. This matters if you plan to refinance or sell within a few years.

At Homejourney, we help you compare all these factors across DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, and other major banks. Submit one application through our platform, and receive personalized rate offers from all partner banks, making it easy to evaluate your true options.

SORA and Your Borrowing Power: The TDSR Rule

Understanding SORA also helps you grasp your borrowing limits. Singapore's Total Debt Servicing Ratio (TDSR) rule limits your monthly debt repayments to 60% of your gross monthly income.[1] This includes your mortgage, car loans, credit card debt, and other financial obligations.

Banks calculate your maximum borrowing amount using a stress-tested SORA rate—typically assuming SORA is 1-2% higher than current levels. This conservative approach ensures you can still afford your mortgage if rates rise. So even if current SORA is 4.20%, the bank might stress-test at 5.20% to ensure you're protected.

This is why your approved loan amount might be lower than you expected. The bank isn't being restrictive—it's protecting you from overextending if rates climb. Calculate your borrowing power instantly with Homejourney's eligibility calculator to see what you can realistically afford based on current SORA levels and stress-testing assumptions.

Fixed vs Floating Rates in a SORA World

While most Singapore mortgages use floating SORA rates, some banks still offer fixed-rate options. Understanding the trade-offs helps you choose what's right for your situation.

Feature	Floating SORA	Fixed Rate
Payment Predictability	Changes quarterly (3M SORA) or semi-annually (6M SORA)	Locked for entire loan period
Current Rate Level	Lower initial rate (e.g., 5.00%)	Higher rate (e.g., 5.50%+)
Interest Rate Risk	You bear the risk if rates rise	Bank bears the risk; you're protected
Refinancing Flexibility	Can refinance after lock-in period	May have higher early repayment penalties
Best For	Borrowers who can handle payment variability; expect stable or falling rates	Risk-averse borrowers; those expecting significant rate increases

Most Singapore borrowers choose floating SORA rates because initial rates are lower and you can refinance if rates become unfavorable. However, if you're risk-averse or expect significant rate increases, the certainty of a fixed rate might be worth the premium.

Timing Your Mortgage Application: Reading SORA Trends

Should you apply for a mortgage now, or wait for rates to fall? This is a common question, and the answer depends on several factors.

SORA rates are influenced by global economic conditions, Singapore's monetary policy, and interbank lending dynamics. While you can't predict rates perfectly, you can make informed decisions by monitoring trends. Rising SORA typically signals economic strength but means your mortgage payments will increase. Falling SORA suggests economic slowdown but benefits your wallet.

However, trying to time the market perfectly is risky. Rates could move in unexpected directions, and delaying your purchase might mean missing out on a property you love or facing price increases. A better approach: apply when you're ready to buy, lock in today's rates, and benefit from the flexibility to refinance if rates drop significantly in future years.

Track live SORA rates on Homejourney's bank rates page to monitor trends, but don't let short-term fluctuations drive your decision. Focus on finding the right property and securing competitive financing terms.