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| LATEST AVAILABLE SIBOR RATES | |
|---|---|
| 1 month SIBOR | 0.8102% |
| 3 months SIBOR | 0.9988% |
| 6 months SIBOR | 1.2500% |
| 12 months SIBOR | 1.3812% |
You might have come across the term 'SIBOR' when looking around for a home loan in Singapore and have been comparing rates, without knowing what it really means. Here we'll explain SIBOR in greater detail.
What Is SIBOR?
SIBOR (Singapore Interbank Offered Rates) is the daily interest rate at which Singapore's banks, known as Contributor Banks or Panel Banks, offer to lend unsecured funds of a reasonable size to other banks in the country's money market (interbank) market just prior to 11:00 a.m. Singapore time.
A minimum of 12 and up to a maximum of 20 contributor banks are required to submit rates to the Association of Banks in Singapore (ABS) just prior to 11:00 a.m. Singapore time on each Business Day.
The data is available to subscribers for a monthly user fee, and the rates will be published on the ABS website seven days after. The SIBOR comes in tenures of 1, 3, 6 and 12 months.
SIBOR Rate As The Asian Standard For Home Loans
SIBOR, which is the property of the ABS Benchmarks Administration Co Pte Ltd, a wholly-owned subsidiary of the Association of Banks in Singapore (ABS), is widely used in the Asian region as a reference rate for various types of loans, including floating and fixed rate home loans.
Interbank Loans
SIBOR loans between Contributor Banks can have maturity periods of 1, 3, 6 or 12 months, after which time the borrowed money, denominated in Singapore dollars (SGD), must be returned to the lending bank.
Determining Maturity Dates
SIBOR maturity dates use the ISDA Modified Following Business Day Convention, which means, according to the ABS, that "if the maturity date of a deposit falls on a day that is not a business day, the maturity date shall be the first following day that is a business day, unless that day falls in the next calendar month, in which case the maturity date will be the first preceding day that is a business day."
Who Determines The SIBOR Rate?
SIBOR for each maturity is calculated on each business day based on offered interbank unsecured, simple borrowing rates for loans of reasonable market size and governed by Singapore laws, submitted to the ABS just prior to 11:00 a.m. Singapore time, by no less than 12 and no more than 20 Panel Banks in Singapore.
The daily benchmark rates are calculated by Thomson Reuters - the Calculation Agent appointed for ABS Co., and published at 11:30 a.m. on each business day on Thomson Reuters and Bloomberg screens, and on the ABS website seven days after.
Calculation Overview
ABS collects the submitted borrowing rates just before 11:00 a.m. Singapore time and hands them off to its Calculation Agent, Thomson Reuters, which ranks them highest to lowest, discards the top and bottom quartiles, and averages the remaining rates out to five decimal places before posting the rate at 11:30 a.m.
Secure Data
Although the daily SIBOR rates are posted on the ABS platform, the underlying data supplied to the Calculation Agent is closely held, usually disclosed only to the ABS Administrator, the Administrator of the Monetary Authority of Singapore, and other relevant regulatory authorities, but not to the general public nor market participants.
The SIBOR Panel Banks In Singapore
The 20 SIBOR Panel Banks are:
- Australia & New Zealand Banking Group Limited
- The Bank of Tokyo-Mitsubishi UFJ
- Bank of China Limited
- Barclays Bank PLC
- Bank of America, National Association
- BNP Paribas
- CIMB Bank Berhad
- Citibank N.A
- Credit Suisse AG
- DBS Bank Ltd
- Deutsche Bank Aktiengesellschaft
- The Hong Kong and Shanghai Banking Corporation Limited
- JP Morgan Chase Bank NA
- Mizuho Bank Limited
- Malayan Banking Berhad
- Oversea-Chinese Banking Corporation Limited
- Standard Chartered Bank
- Sumitomo Mitsui Banking Corporation
- United Overseas Bank Limited
- UBS AG
What If Less Than 12 Rates Are Contributed?
If, on any business day, ABS receives less than the minimum 12 rates for a maturity period from Panel Banks, the ABS Administrator will issue a notice that SIBOR is not available for that day because of insufficient submissions.
SIBOR Home Loans
In Singapore, fixed -rate and floating rate home loan packages can be packaged based on the appropriate SIBOR rate plus an extra (or premium) amount, called a spread, that is determined by a number of factors, such as the size of the home loan, the credit standing of the borrower, the location of the property, and more.
Read GET.com's home loans guide here.
Fixed Rate vs Floating Rate Home Loan Pegged To SIBOR
A fixed rate home loan has a specific interest rate that is fixed and guaranteed for the initial period (typically 2 or 3 years) of the entire loan tenure, and the subsequent years' interest rates can vary.
On the other hand, a floating rate home loan could be pegged to the prevailing SIBOR rates, usually based on 3-month or 1-month SIBOR rates.
In determining the interest rate for the loan, the bank applies the relevant SIBOR rate on a specific date (Rate Review Date) plus a specific percentage above the SIBOR rate.
For example, if the 3-month SIBOR is used, the 3-month SIBOR rate on the Rate Review Date plus the additional percentage will be used as the interest rate for the following 3 months, and this interest rate will be revisited on the next Rate Review Date.
First Business Day Of Month
The SIBOR component of a mortgage interest rate is typically the SIBOR daily rate as of the first day of the month and applies to all mortgages pegged to SIBOR for the month.
1M SIBOR vs 3M SIBOR
The "M" stands for month, so a 1M SIBOR home loan package resets its rate every month, while the 3M package resets every 3 months, depending on the prevailing SIBOR rate in play on the reset date / Rate Review Date.
Reset Periods
Theoretically, although SIBOR-pegged mortgage packages might be available with reset periods (or tenures) of 1, 3, 6 or 12 months, in practice the 1 and 3 month packages are by far the most popular, especially when interest rates are fairly low.
Advantage Of Shorter-Tenure SIBOR-Pegged Packages
These packages are popular during periods of falling interest rates, because they give borrowers more opportunities to benefit from decreasing rates.
Advantage Of Longer-Tenure SIBOR-Pegged Packages
Naturally, these packages are more popular during periods of rising rates, as borrowers save money up until the next reset date, but the packages are also favored by borrowers who want more certainty of unchanged rates for a longer period of time.
Tenure Risk
Despite everyone's best efforts, a forecast of future interest rates is never certain, so you might choose a short-tenure SIBOR package only to see rates start to rise, or see rates fall after you've selected a long-tenure SIBOR package.
Your Source For Home Loan Information
To learn more about the benefits and downsides of SIBOR and SOR home loans, you can read this guide to Singapore Home Loans: SIBOR vs SOR.
Here are 4 things to consider when comparing home loans and 4 things to consider when you do a home loan refinancing.
You can also check out our guide to SIBOR and SOR loans in Singapore. If you're buying your first home, check out our home loans guide for first-time home buyers.
Visit GET.com for the latest home loan offers from all the major banks in Singapore, as well as timely articles about home loans, interest rates and the real estate industry.
Grace Cheng is a seasoned traveler who loves collecting points and miles, and is constantly planning where to go next using her miles. She is co-founder and editor-in-chief at GET.com. Email: g@get.com.
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Source: GET.com