In Singapore, loan packages offered by most banks and other financial institutions are pegged to either SIBOR or SOR. This is essentially a cost price for the banks, on top of which a margin is added, called a spread.
The Singapore Interbank Offered Rate (SIBOR) is fixed by the Association of Banks in Singapore (ABS) based on the interest rates at which banks offer funds to other banks in the interbank market – it is a reference interest rate at which banks in the area can borrow funds from other banks of the Asian region.
The Swap Offer Rate is also set by the ABS and constituents the average cost of funds used for commercial lending by banks and financial institutions. SOR is influenced by Forex trade, which is unstable, and has been affected in the last few years by the erratic world market and exchange rates.
Because of these last reasons, SIBOR is more stable and, even though SOR has the potential of being much lower, it can also go through dramatic fluctuations and rise above its "competitor."
Regardless, both rates are considered benchmark rates for property loans in Singapore, and while they can differ quite drastically, absolutely they go in the same direction. That is to say, if the Singapore Inteerbank Offered Rate's latest trend is rising, SOR will rise, as well. These two rates are the most popular on the market, because of their relatively simple concepts and high accessibility and visibility. They can be consulted on well-known financial papers, such as The Business Times, and on websites like Bloomberg. The Singapore Interbank Offered Rate and the Swap Offer Rate are shared with multiple banks, which gives them shared risk, unlike variable or internal-board rates, which are only used by some banks.
Choosing a home loan from a certain bank means you will have to choose between either fixed or floating rate packages. In the event you choose floating rates, you will have three choices: a package pegged to SIBOR, a package pegged to SOR, or a package with rates that are fixed to the bank's board rate. Most Singaporean banks will offer only one or three month SIBOR / SOR rates, although they actually come in one, two, three, six, nine and twelve months formats.
The issue with the interest rates banks offer of their own is transparency . In choosing between SIBOR / SOR and Bank Board Rates you will have to consider this and make sure the bank or financial institution you choose is transparent with their interest rates. Floating rate packages pegged to board rates that are set by banks are risky, and so you have to make sure you have enough information on the choice you are considering.