Fixed vs Floating Rate Home Loan in Singapore: Which Makes More Sense Right Now
Fixed and floating rate home loans work differently in Singapore. Here is a clear comparison of how each works, what the current rate environment means, and how to decide which is right for your situation.
Every property buyer in Singapore who takes a bank loan faces the same decision: fixed rate or floating rate?
The answer depends on your financial situation, your risk tolerance, and where interest rates are likely to go. Here is how to think through it.
How Fixed Rate Loans Work
A fixed rate loan locks your interest rate for a specified period, typically two to five years in Singapore. During this period, your monthly repayment stays the same regardless of what market rates do.
After the fixed rate period ends, the loan typically reverts to a floating rate (often pegged to the bank's board rate or a market rate like SORA). At this point you can refinance to a new package or stay on the floating rate.
The benefit: certainty and protection against rate rises during the fixed period.
The cost: fixed rates are typically slightly higher than floating rates at the time of signing, and they come with lock-in periods during which you cannot refinance or repay early without penalty.
How Floating Rate Loans Work
Floating rate loans in Singapore are now primarily linked to SORA (Singapore Overnight Rate Average), which replaced SIBOR and SOR as the benchmark rate. Your rate is typically SORA plus a spread (for example, three-month compounded SORA plus 0.80%).
Your monthly repayment moves with SORA. When rates rise, you pay more. When rates fall, you pay less.
Floating rate loans may offer lower initial rates than fixed, and they typically do not have lock-in penalties after a specified period. This gives you more flexibility to refinance when better packages appear.
The Current Rate Environment in Singapore
SORA has come down from its 2023 highs. In 2024 and into 2025, the US Federal Reserve began cutting rates, and SORA followed directionally. In 2026, rates have moderated further, though they remain above the near-zero levels of 2020 to 2021.
In an environment where rates have been falling from a peak, floating rate loans start to look more attractive compared to locking in a fixed rate from the higher period. However, nobody can predict with certainty whether rates will continue to fall, stabilise, or rise again.
How to Decide
Fixed rate makes more sense if: you need certainty in your monthly repayments, your budget is stretched close to TDSR limits, or you have reason to believe rates may rise from current levels.
Floating rate makes more sense if: you can absorb some variability in monthly payments, you want the flexibility to refinance without penalty, or you believe rates are more likely to fall or stay stable.
Many buyers split the difference by taking a shorter fixed period (two years rather than five) and then refinancing, which is the most common strategy in Singapore's mortgage market.
Lock-In Period
Always check the lock-in period. During the lock-in, if you refinance or sell, you typically owe a penalty of 1.5% of the outstanding loan. On a $700,000 loan, that is $10,500. Include this in your calculations if there is any chance you might sell or refinance within the lock-in window.
Frequently Asked Questions
What is SORA and how does it affect my home loan in Singapore?
SORA (Singapore Overnight Rate Average) is the benchmark interest rate for floating rate home loans in Singapore. It replaced SIBOR and SOR from 2024 onwards. Your floating rate is typically SORA plus a spread set by the bank. As SORA rises or falls, your loan interest rate and monthly payment change accordingly.
Can I switch from a fixed rate to a floating rate during the loan?
Generally not during the lock-in period without penalty. After the lock-in, you can refinance to a floating rate package with the same bank (repricing) or a different bank (refinancing). It is worth reviewing your loan package every two to three years to ensure you are on a competitive rate.
What is the difference between repricing and refinancing a home loan in Singapore?
Repricing is switching to a new package with your existing bank, which is simpler and involves less paperwork. Refinancing is switching to a new bank entirely. Refinancing involves legal fees and a fresh valuation, but often secures better rates. The savings from refinancing must outweigh the costs.
Is it better to fix a home loan for 2 or 3 years in Singapore right now?
This depends on your view of the rate environment and your need for certainty. A two-year fix gives you more flexibility to refinance sooner if rates fall further. A three-year fix provides a longer period of certainty if you are concerned about rate volatility. Neither is universally correct.
How much does a 0.5% interest rate change affect my monthly repayment?
On a $600,000 loan over 25 years, a 0.5% rate change alters monthly repayment by approximately $150 to $170. On a $1 million loan, the impact is approximately $250 to $280 per month. Use a mortgage calculator to run this with your specific loan amount.
Want Help Evaluating the Best Loan Package for Your Purchase?
Serene works with buyers across a range of bank packages and can point you toward the key questions to ask your mortgage broker or banker before you sign.
Book a planning session
Ready to understand your property position?
Have a conversation about your numbers, your timing, and what a sensible next move actually looks like, for you.