OCBC launches new Sora-pegged home loan

OCBC Bank has launched a home loan that is based on 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 categories - completed properties, those under construction, new mortgages and existing ones being repriced.

OCBC's move reflects the industry's shift towards adopting Sora as the new interest rate benchmark for the Singdollar cash and derivatives market.

Sora refers to the average rate of unsecured overnight interbank Singdollar transactions brokered here.

OCBC's new Compounded Sora Home Loan replaces a Sora-based one launched on July 13 that based interest rates on a simple average of the daily Sora rates in the preceding 90 calendar days.

OCBC said it approved around $50 million in loans in the first two weeks of its launch.

Like the three-month Singapore Interbank Offered Rate (Sibor) home loan package, the three-month Compounded Sora deal has a two-year lock-in period. Customers can make prepayments of up to 50 per cent of the loan amount in the first two years with no penalty.

Mr Sunny Quek, head of consumer financial services at OCBC, 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 Singdollar markets."

The MAS publishes Sora - as well as the compounded Sora rates for the one-, three-and six-month tenors - for a given business day by 9am the next business day.

OCBC's three-month Compounded Sora package will reference the three-month compounded Sora rate to calculate the monthly loan instalment, with the rate updated monthly instead of every three months.

Customers will be told the interest rate and instalment amount at the start of the month, with payment due at the end of the month, making it easier for them to plan their finances.

THE BUSINESS TIMES