Finance professional Sophia Tan (not her real name) and her sister took up a new loan for their three-bedroom condominium at the end of last year.

They were previously on a floating-rate home loan based on the Singapore Interbank Offered Rate (SIBOR) but made the switch after their bank told them SIBOR will be discontinued after Dec 31, 2024.

After speaking with their bank’s home loan repricing specialist about their options, the sisters decided on a two-year, fixed-rate home loan at 3 per cent per annum. As the need to reprice their loan with their bank arose from the impending discontinuation of SIBOR, they did not incur any of the usual repricing fees nor was there any re-computation of their Total Debt Servicing Ratio (TDSR), Loan-To-Value (LTV), and Mortgage Servicing Ratio (MSR) requirements.

Shares Ms Tan: “The process was quite smooth and fuss-free. The whole process, from the first discussion with the bank’s home loan repricing specialist to the time taken to consider our options, and the eventual repricing, took about two weeks in total.

“And as our relevant information was already with the bank, the specialist was able to do the sums and simulate the monthly repayments across the different home loan packages for us.”

Ms Tan is among over 70,000 homeowners who have taken active steps to switch out of their SIBOR-based loans, ahead of the discontinuation of SIBOR at the end of this year. Currently, almost 50,000 homeowners have yet to switch. They are strongly encouraged to contact their banks before the end of April this year to understand their options and ensure a smooth transition.

More choices before April 30

Affected homeowners who approach their banks before the end of April will be allowed to choose from a range of different loan packages, including the SORA Conversion Package, which is designed to minimise changes in home loan borrowers’ all-in loan payment at the point of conversion of the loan.

SORA, which refers to the Singapore Overnight Rate Average, is the interest rate benchmark that Singapore banks now use to price floating rate loans. The Monetary Authority of Singapore (MAS) publishes SORA daily on its website, along with the compounded average SORA for the past one-, three- and six-months, which are more stable than the daily figure. The 3-month Compounded SORA is the most common reference rate for floating-rate home loan packages offered by banks in Singapore.

Customers will not incur any switching fees so long as they stay with the same bank.

“If we didn’t take any action last year, we wouldn’t have known that repricing to another home loan would result in lower monthly instalments. A little goes a long way, so I’m glad we started early,” Ms Tan says, noting that the 3 per cent interest rate she’s currently paying was lower than the 3-month Compounded SORA rate at that time.

“The certainty of fixed monthly home loan payment gives us peace of mind, while the shorter lock-in period provides some flexibility as we can consider repricing again in two years,” she adds.

Better to act quickly

Mrs Ong-Ang Ai Boon, director of The Association of Banks in Singapore (ABS), says borrowers of SIBOR-based home loans should talk to their banks and consider their various options as soon as possible, just as Ms Tan and her sister had done.

“Borrowers are encouraged to proactively contact their banks, particularly if their mortgage payments constitute a big part of their monthly expenses.

“The discontinuation of SIBOR is an opportunity for borrowers of SIBOR-based home loans to look at an alternative loan package without incurring any fees,” she adds.