13/02/2023
What is SORA that all banks use for their home loans?
In simple terms, the SORA rate is a type of interest rate used by banks in Singapore to determine the cost of lending money, including for home loans. It's like a benchmark that helps banks set their interest rates, so they can offer more consistent and predictable pricing to their customers.
Imagine you're looking to buy a house and you need to take out a loan from a bank. The bank might use the SORA rate as a starting point to determine how much they will charge you in interest for borrowing the money. If the SORA rate is high, the bank will likely charge you a higher interest rate, and if it's low, the bank might charge you a lower interest rate. This way, you can compare the interest rates offered by different banks and choose the one that works best for you.
By using the SORA rate, banks can make sure their interest rates are fair and competitive, which helps you as a borrower make informed decisions when choosing a home loan.
Banks then add a markup on top of their SORA to cover their overheads.
Since August 2019, Association of Banks have recommended SORA as a robust benchmark.
The Singapore Overnight Rate Average (SORA) is the volume-weighted average rate of borrowing transactions in the unsecured overnight interbank SGD cash market in Singapore between 8am and 6.15pm.
