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Deadline Nears: Two-Thirds of Sibor Mortgage Holders Yet to Switch

As the deadline approaches for mortgages tied to the Singapore Interbank Offered Rate (Sibor), it’s reported that although around 30,000 borrowers switched between January and October, approximately 57,000 still hold onto their Sibor-based loans. The Association of Banks in Singapore (ABS) notes that Sibor is set to be discontinued by the end of 2024, with the Singapore Overnight Rate Average (Sora) replacing it as the primary reference rate for floating-rate mortgages.

Key Points:

  1. Transition Period: ABS emphasizes that homeowners who have not yet switched their loan packages have until the end of April 2024, known as the “active transition period,” to make a decision.
  2. Options during Transition: During this transition period, borrowers can choose between the Sora conversion package (SCP) or opt for any prevailing fixed, floating, or hybrid home-loan packages offered by their respective banks.
  3. SCP Details: The SCP directly converts existing Sibor-based loans based on factors such as the existing Sibor loan margin, the three-month compounded Sora rate, and an adjustment spread, reflecting the difference between the Sibor and Sora rates.
  4. Offered by Banks: Banks are offering Sibor home loan customers the option to switch to the SCP without additional fees or additional lock-in periods until the end of April. However, choosing other loan packages from banks may entail specific terms.
  5. Automatic Switch for Non-Converters: Homeowners who do not convert their loans by the end of April will be automatically moved to the SCP in June. The SCP for these cases will be calculated based on the existing Sibor loan margin, the three-month compounded Sora rate, and an adjustment spread based on the five-year historical median.
  6. Considerations: ABS advises homeowners to consider financing preferences, opt for fixed-rate packages for interest rate certainty, and evaluate the all-in interest rates of different loan packages for an effective comparison.

Despite the impending discontinuation of Sibor, some homeowners remain hesitant, possibly due to complexities in the transition process. ABS suggests seeking guidance from mortgage brokers to navigate available options effectively.

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