What is the difference between a board rate and a SORA-pegged rate?

When comparing floating-rate home loan packages, you will encounter two main types of reference rates: board rates and SORA-pegged rates. Understanding the difference is essential because it affects both the transparency and predictability of your mortgage repayments.

A board rate, also known as an internal reference rate, is set by the bank at its own discretion. Each bank determines its own board rate based on internal cost-of-funds calculations, competitive considerations, and market conditions. While banks generally keep board rates relatively stable, they have full control over when and by how much they adjust it. This means your interest rate can change without a publicly observable trigger, making it less transparent. Board rate packages are typically expressed as the bank's board rate minus a discount, such as "Board Rate minus 2.00%."

A SORA-pegged rate is tied directly to the Singapore Overnight Rate Average, which is published daily by the Monetary Authority of Singapore. Because SORA is derived from actual transaction data in the interbank market, it moves in response to real market forces and is publicly visible. SORA-pegged packages are expressed as compounded SORA plus a fixed spread, such as "3-month compounded SORA plus 0.80%." The transparency of SORA means you can track exactly why your rate is changing and by how much.

The key advantage of SORA-pegged rates is transparency. You can independently verify the reference rate and understand precisely what is driving changes in your monthly payments. With board rates, you are relying on the bank's discretion, which can sometimes lead to rates that move differently from broader market trends.

However, board rate packages sometimes offer other benefits, such as shorter lock-in periods or more attractive terms in other areas. Some borrowers prefer the relative stability of board rates during volatile periods, as banks tend to smooth out extreme short-term fluctuations.

When evaluating mortgage options through Cashew, our advisors ensure you understand the reference rate mechanics behind each package so you can make an informed decision about which structure best aligns with your preferences.