SOR home loan rate – how it works

Frequently asked question: what is SOR (Swap Offer Rate) and how it works. The concept of a swap is not quite easy to grasp. The best description available on how the SOR, in particular, works is this discourse by SGX on the SOR pricing model. Here are some excerpts:

The SOR represents the effective cost of borrowing SGD synthetically through borrowing USD for 3 months and swap out the USD in return for SGD for the same maturity.

In simple terms, SOR is the projected interest rate it costs you if you borrowed the same amount of money in USD instead.

The Association of Banks in Singapore (ABS) determines the fixing of the 3-month SOR. The ABS models the administration of its fixing rates after the well-established procedures of the British Bankers Association (BBA) in their London Inter-bank Offered Rate (LIBOR) fixing. In this regard, the ABS selects a panel of contributor banks and determines the fixing procedures, on the basis of full transparency and accepted market convention. The SGD SIBOR, USD SIBOR and SOR are fixed daily at 11.00 am Singapore time. The value date for the interest rate fixings is two business days after the fixing date. Telerate, a division of Bridge, is appointed the Calculating Agent and Distributor, and the daily Fixing Rates will be concurrently available to all other information services vendors.

An adaptation of the pictorial presented in the discourse on how SOR works:



SGDF1 = USD/SGD Foreign Exchange forward
SGDF2 = USD/SGD Foreign Exchange forward
USDIRF = Forward USD Interest Rate for the underlying SOR tenor

At the beginning of the 3 month period (note that these ‘actions’ are synthetic), borrow USD at USDIRF and immediately convert it to SGD at SGDF1 and invest the proceeds. At the end of the 3 month, convert the proceeds from SGD investment to USD at SGDF2 and settle the USD borrowing. This gives rise to the following formula for deriving SOR:


whereby Act = Actual number of days in the 3 months

Based on this formula we can deduce the following 2 general principles

  • SOR is higher when USD interest rate is higher
  • SOR is higher when USD is expected to rise against SGD

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