Tue, Aug 18, 2020 – 7:22 PM
OCBC Bank has launched a new Sora-based home loan, which references the three-month compounded Singapore overnight rate average (Sora) that is published by the Monetary Authority of Singapore (MAS).
The three-month Compounded Sora Home Loan is available for all loan types – completed properties, properties under construction, new home loans and repricing of existing home loans. This comes as the industry is moving towards adopting Sora – the average rate of unsecured overnight interbank Sing dollar transactions brokered in Singapore – as the new interest rate benchmark for the SGD cash and derivatives market.
The new compounded Sora home loan by the bank will replace a Sora-based home loan that was launched by OCBC on July 13 which based interest rates on a simple average of the daily Sora rates in the preceding 90 calendar days. In the first two weeks of its launch, over S$50 million in loans were approved, said OCBC.
Like the three-month Singapore Interbank Offered Rate (Sibor) home loan package, the three-month Compounded Sora home loan package has a two-year lock-in period. Customers can make pre-payments of up to 50 per cent of the loan amount in the first two years with no penalty.
Sunny Quek, head of consumer financial services at OCBC Bank, said: “We received a positive response to the industry’s first retail Sora-pegged home loan that was launched last month. This shows that consumers are receptive to Sora as the new interest rate benchmark for SGD markets. With MAS’ publication of the key features and calculation methodology of Sora as well as the actual compounded Sora rates, consumers should be even more open to adopting Sora as the transparency and data availability are further enhanced.”
In Singapore, the MAS publishes Sora – as well as the Compounded Sora rates for the one-month, three-month and six-month tenors – for a given business day by 9am the next business day. The OCBC three-month Compounded Sora Package will reference the three-month Compounded Sora rate to calculate the monthly loan instalment, and the rate will be updated monthly instead of every three months, said OCBC.
Customers will be informed at the start of the month of the interest rate and instalment amount to be charged at the end of the month, making it easier for them to plan their finances.
Shares in OCBC closed at S$8.85 on Tuesday, down six Singapore cents.