Banking Fintech News

DBS launches Singapore’s first SORA-pegged business property mortgage loan

DBS survey shows that 3 in 4 SMEs in Singapore remain positive about the future, even as 1 in 5 are ‘exhausted’ from battling the economic fallout from Covid-19

Provides business property owners with more property financing options amid challenging economic outlook

Marks milestone in nation’s interest rate transition roadmap towards adoption of SORA as main interest rate benchmark for SGD financial markets

DBS today announced the launch of SORA-pegged Business Property Loan, Singapore’s first business property mortgage loan referencing the Singapore Overnight Rate Average (SORA)[1]. The new package provides business property owners with additional property financing options and covers all property loan types[2]. It also marks another milestone in Singapore’s transition towards the adoption of SORA as the main interest rate benchmark for SGD cash and derivatives market.

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Specially tailored for SMEs looking to finance their commercial and industrial properties, SORA-pegged Business Property Loan will be available from 3 September 2020. Interest rates on the SORA-pegged Business Property Loan will be based on the 3-Month Compounded SORA published by the Monetary Authority of Singapore (MAS), as well as an applicable margin.

Joyce Tee, Group Head of SME Banking at DBS, noted that while demand for new business property purchases has dropped, the bank has observed a sustained interest among the SME community for property refinancing solutions amid the challenging economic outlook. “DBS’ new SORA-pegged Business Property Loan affords SME business property owners the opportunity to refinance their property loans on more competitive terms. With the bank’s recent launch of various SORA-based products, we have also seen some interest among SME owners in SORA-pegged loans. With the industry moving towards a phased discontinuation of SIBOR[3] and adoption of SORA, we are now giving business property owners the option of taking up a SORA-pegged package ahead of time to save them the hassle of repapering their loans down the road.”

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SME business property owners can borrow up to 80% of their property value and choose to stretch their repayment tenor to up to 25 years.

Given SORA’s growing importance as a key interest rate benchmark in SGD financial markets, the new SORA-pegged Business Property Loan supports The Association of Banks in Singapore and the Singapore Foreign Exchange Market Committee (ABS-SFEMC)’s efforts to develop new SORA-based markets. It also complements the industry-led transition roadmap set out by the Steering Committee for SOR Transition to SORA (SC-STS)[4].

Last month, DBS announced the agribusiness industry’s first SORA-based loan, as well as the industry’s first SORA loan coupled with an interest rate swap. In May 2020, DBS was also the first financial institution in Singapore to successfully price the issue of a SORA-referenced floating rate note.

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