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Most S'pore home owners still prefer fixed-rate loans despite lower floating rates
The Straits Times
|May 08, 2026
Market uncertainty, desire to hedge against future rate hikes among reasons: Banks
Floating-rate home loan packages offer lower interest rates than fixed-rate packages as the one-month and three-month compounded SORA rates have come down to around 1 per cent, from a high of 3.8 per cent in 2023. This has prompted some home owners to switch to floating-rate packages.
(ST FILE PHOTO)
Most home owners here still prefer to take fixed-rate mortgages even though the interest rates for these packages have risen amid the Middle East conflict, and they are now pricier compared with loans tied to floating rates.
Reasons cited include the desire for greater peace of mind and to hedge against potential future rate hikes, local banks told The Straits Times.
Nevertheless, some home owners are making the switch to floating-rate packages, whose rates have been declining in line with the compounded Singapore Overnight Rate Average (SORA) rates.
Floating-rate loans are typically pegged to the three-month compounded SORA, which banks use to price mortgages here - namely by adding a fixed percentage, called the spread, to cover their costs and profit.
Fixed-rate packages have become more expensive as global interest rate expectations rise and central banks are expected to slow the pace of interest rate cuts to counter the impact of the Middle East tensions on inflation.
Interest rates in Singapore largely track global rates because the Republic manages inflation through its exchange rate, rather than by setting interest rates.
If global rates are expected to rise, Singapore rates must go up too or money will flow out, weakening the Singdollar.
Ms Maryanne Phua, head of home loans at OCBC Bank, said fixed-rate packages have increased by 0.1 percentage point to 0.2 percentage point in 2026, tracking higher long-term market interest rates.
The rates are now edging towards 2 per cent, but remain far from the peak of 4.5 per cent reached in late 2022.
This story is from the May 08, 2026 edition of The Straits Times.
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