SORA Explained: The Benchmark Rate Behind Your Singapore Home Loan
How the Singapore Overnight Rate Average replaced SIBOR and SOR as the key reference rate.
SORA (Singapore Overnight Rate Average) is the volume-weighted average interest rate of unsecured overnight interbank Singapore dollar transactions, published daily by the Monetary Authority of Singapore, and it now serves as the primary benchmark rate for pricing SGD home loans and other floating-rate products.
Not financial advice. All figures for educational reference only. Data as at October 2026. Last updated: October 2026.
Table of Contents
Key Takeaways
- SORA is calculated from actual overnight unsecured SGD interbank lending transactions, making it a transaction-based rather than a survey-based benchmark.
- MAS publishes SORA daily, and most floating-rate SGD home loans now reference a compounded SORA rate, typically over a 1-month or 3-month period.
- SORA replaced SIBOR and SOR, which were phased out after 2024 following global regulatory concerns about survey-based benchmarks being open to manipulation.
- Because SORA is backward-looking (compounded over a recent period), borrowers only know their exact rate for a period shortly before or as it is charged, unlike older forward-looking benchmarks.
- A typical SORA-pegged home loan is quoted as ‘compounded SORA + spread’, where the spread is the bank’s margin and may step up in later years of the loan.
What Is SORA?
SORA measures the actual interest rate at which banks lend each other Singapore dollars overnight on an unsecured basis, calculated as a volume-weighted average across all qualifying transactions reported to MAS each business day. Because it is derived from real, executed transactions rather than banks’ own estimates or quotes, it is considered a more robust and harder-to-manipulate benchmark than the survey-based rates it replaced. MAS has published SORA since 2005, but it only became the primary benchmark for retail and corporate lending in Singapore following the global shift away from LIBOR-style benchmarks, completed around 2024 for SGD markets.
How Does SORA Work in Singapore?
Because daily SORA by itself is volatile and impractical for pricing a loan directly, most SGD loans use a ‘compounded SORA’ rate, which averages SORA over a trailing period — commonly 1 month or 3 months — smoothing out daily noise. A home loan package might be quoted as ‘3-month compounded SORA + 0.65%’, meaning the borrower’s effective rate resets every quarter based on the realised compounded SORA over the preceding three months, plus the bank’s fixed spread.
| Benchmark Period | How It’s Used | Typical Reset Frequency |
|---|---|---|
| 1-month compounded SORA | Some home loan and business loan packages | Monthly |
| 3-month compounded SORA | Most common for SGD home loans | Quarterly |
| Daily SORA (uncompounded) | Reference rate for derivatives, wholesale markets | Daily |
Source: MAS, Association of Banks in Singapore (ABS) SORA conventions
SORA Example
Suppose a borrower takes a home loan priced at 3-month compounded SORA + 0.65% spread, and the realised 3-month compounded SORA for the most recent quarter works out to 3.05%. The borrower’s effective interest rate for that quarter is 3.05% + 0.65% = 3.70%. If SORA then falls to 2.80% the following quarter, the rate resets down to 3.45%, and the borrower’s monthly instalment adjusts accordingly — illustrating that under a SORA-pegged package, the borrower’s rate moves with actual market conditions each reset period rather than staying fixed.
Advantages of SORA
- Based on real transactions. SORA is calculated from actual executed overnight interbank trades, making it more transparent and resistant to manipulation than survey-based benchmarks like SIBOR were.
- Published independently by MAS. As the central bank publishes SORA directly, borrowers and lenders rely on a neutral, publicly available source rather than bank-submitted estimates.
- Reflects current market conditions. Because it is based on actual overnight funding costs, SORA tends to move closely in line with the broader interest rate environment.
- Standardised across the industry. Most SGD floating-rate loans now reference the same SORA conventions, making packages easier to compare across banks.
Risks and Limitations
- Backward-looking nature. Because compounded SORA is calculated over a trailing period, borrowers do not know their exact rate for an upcoming period until it is almost over, unlike a forward-looking rate fixed at the start of the period.
- Still exposed to rate volatility. A SORA-pegged loan’s cost rises when interbank rates rise, just as SIBOR-pegged loans did previously.
- Spreads can step up over the loan tenor. Some packages increase the bank’s spread in later years, raising the effective rate even if SORA itself stays flat.
- Less familiar to some borrowers. Those used to older SIBOR-pegged packages may need time to understand how compounded, backward-looking rates behave differently.
SORA vs SIBOR
SIBOR (Singapore Interbank Offered Rate) was the dominant benchmark before the industry-wide transition to SORA.
| Feature | SORA | SIBOR (legacy, discontinued) |
|---|---|---|
| Basis | Actual transaction data | Bank-submitted estimates/quotes |
| Forward/backward looking | Backward-looking (compounded over a trailing period) | Forward-looking (fixed at the start of the period) |
| Current status | Primary SGD benchmark | Phased out for new SGD contracts after 2024 |
| Published by | MAS | Formerly the Association of Banks in Singapore |
Source: MAS, ABS SORA transition timeline
The Bottom Line
For Singapore borrowers and investors, SORA matters because it now underpins the pricing of most floating-rate SGD home loans, so understanding how compounded SORA resets each period is essential to anticipating how your mortgage instalments will move with interest rates.
Frequently Asked Questions
What is SORA in simple terms?
SORA is the average interest rate at which banks actually lend each other Singapore dollars overnight, published daily by MAS, and it now underlies most floating-rate SGD home loans.
Why did Singapore move from SIBOR to SORA?
Global regulators pushed for a shift away from survey-based benchmarks like SIBOR, which were vulnerable to manipulation, toward transaction-based benchmarks like SORA that reflect real executed trades.
What is compounded SORA?
Compounded SORA averages the daily SORA rate over a trailing period, commonly 1 or 3 months, smoothing out daily fluctuations for use in loan pricing.
How often does my SORA-pegged home loan rate change?
It typically resets at the end of each compounding period, most commonly every month or every three months, depending on the specific package.
Is SORA the same as the interest rate I pay on my home loan?
No. Your home loan rate is typically quoted as compounded SORA plus a spread set by the bank, so your actual rate is SORA plus that additional margin.