OCBC Bank extends more than S$1 billion home loans linked to Singapore's new interest rate benchmark, SORA, in less than six months
Singapore, 22 December 2020 – Since launching Singapore’s first SORA-based home loan package in July 2020, OCBC Bank has seen a strong demand and have since extended more than S$1 billion loans. Many home buyers leveraged the fully digitalised one-hour only home loan application and approval service that was launched in February 2020 and obtained more than S$500 million home loans through the digital loan application and loan acceptance process.
The positive reception among homeowners to the SORA-based loan is encouraging as Singapore takes steps to move towards referencing overnight risk-free rate.
As the first bank to offer SORA-based home loans, OCBC Bank gives consumers the opportunity to better understand SORA as a new reference rate as both SOR and SIBOR will cease to exist in a few years’ time. OCBC Bank’s existing SORA home loan package references the 3-month Compounded SORA, which is an overnight, backward-looking rate published by MAS, versus SOR and SIBOR, which are quoted for different periods of time in a forward-looking basis.
Mr Sunny Quek, Head of Consumer Financial Services Singapore, OCBC Bank says, “We are glad to be the pioneers in launching a SORA-based home loan and hence be able to provide our customers with an even more comprehensive set of home loan options. On a broader basis, we are committed to help the industry increase the usage of SORA and to guide customers in understanding SORA better. Feedback from our customers and mortgage specialists have been very positive so far given how transparent and robust it is. The strong take-up shows that consumers are receptive to SORA as new interest rate benchmark. We are confident that the market will be ready for SORA even before 2024 comes, when SIBOR-based home loans are officially discontinued.”
Shift from SIBOR to SORA-based home loans
A recent industry report, released by The Association of Banks in Singapore, the Singapore Foreign Exchange Market Committee, and the Steering Committee for SOR Transition to Sora, announced the discontinuation of the remaining SIBOR tenors in phases over the next four years.
The six-month SIBOR will be discontinued three months after the six-month SOR is discontinued, while the commonly-used one-month and three-month SIBOR will be discontinued by end-2024.
The Steering Committee for SOR & SIBOR Transition to SORA also encourages banks and customers to shift away from usage of SIBOR as soon as possible, to reduce reliance on a benchmark that will be discontinued and to adopt SORA rates.
Digitalising the application and approval of home loans
Rolling out the fully digitalised home loan application and one-hour approval service in February 2020 before the outbreak of Covid-19 in Singapore helped OCBC Bank maintain its home loans approval rate at the pre-pandemic level.
Although home purchases fell during the Circuit Breaker, there was still a healthy demand for residential properties. At that time, OCBC Bank was the only bank that could support consumers with a full end-to-end digital loan journey. Since launch, more than 5,000 borrowers have used the service, signaling the confidence in a fully digital loan application and approval service even for home loans.