Mortgage rates in Singapore have dropped to their lowest point in three years and homeowners are starting to feel some relief. Fixed-rate housing loans today cost about half of what borrowers were paying in January. The main question now is whether rates will continue to fall in 2026 or if this is the best we can expect.
What Triggered the Sudden Slide in Singapore Mortgage Rates?
Singapore banks follow trends set by the US Federal Reserve when it comes to home loan rates. The Fed made its third interest rate cut in December which strengthened predictions that borrowing costs would continue to drop. Fixed-rate home loans stood at roughly 3.1% at the beginning of 2025. Banks now offer fixed packages ranging from 1.4% to 1.8% based on the loan amount and repayment period.
Home Loan Rates Hit Multi-Year Lows — What Changed in the Market?
| Loan Category | Start of 2025 | December 2025 | Market Impact Explained |
|---|---|---|---|
| Fixed-Rate Home Loans | Around 3.1% | Between 1.4% and 1.8% | Borrowing costs have almost halved, improving affordability |
| 3-Month SORA Packages | About 3.0% | Near 1.2% | Rates fall to their lowest level since August 2022 |
| Average Bank Spread | Roughly 0.7% | Close to 0.25% | Stronger competition among banks to attract borrowers |
| HDB Concessionary Loan | 2.6% | 2.6% (no change) | Now priced higher than most bank loan options |
Floating Packages Drop Rapidly as Global Rate Pressures Ease
The changes affect more than just fixed loans. Floating-rate packages that follow the three-month SORA have dropped significantly too. SORA fell from approximately 3% in January to 1.2% by mid-December. This marks the lowest point since August 2022. Banks have reduced their margins as well. The typical spread they add on top of SORA has decreased from roughly 0.7% to as low as 0.25%. This kind of competitive environment is quite rare.
2026 Rate Outlook — Are Further Cuts Still on the Table?
Short answer: Yes, but do not expect anything dramatic.
DBS analysts indicate that local rates probably began declining before the Fed made its cuts. This happened because of strong domestic liquidity and safe-haven flows that occurred earlier this year.
For the future the Fed’s most recent projections suggest only one small cut of 0.25% in 2026. Fed chair Jerome Powell has stated clearly that aggressive easing will not happen right now.
Most mortgage experts think SORA has reached its lowest point unless a major global shock occurs.
This could be something like a severe recession or a collapse in the labour market. If you are hoping for home loans below 1% then do not spend too much time thinking about it. The chances are very low.
Banks Compete Aggressively with Discounts and Limited-Time Deals
Even if headline rates stabilise banks are not backing off. Expect to see legal fee subsidies along with cash rebates and zero-penalty early repayment offers. Competition is usually fiercest in Q1 when banks push hard for market share. For homeowners coming out of lock-in periods this is where savings can really stack up.
Refinancing vs Repricing — Where Borrowers Are Seeing Bigger Gains
One homeowner who changed their mortgage rate recently switched to a two-year fixed loan at 1.6% instead of the previous 3% rate & now saves around S$500 each month. This adds up to S$6000 in annual savings simply by adjusting the loan terms. Here is a quick reminder about your options. Refinancing means you switch to a different bank and will need to pay legal fees & valuation fees. Repricing means you stay with your current bank but change to a different loan package & typically involves lower administrative fees. Either option could work well for you depending on your specific circumstances.
HDB Owners Shift Away from HDB Loans as Bank Rates Become Cheaper
The Big Change in 2025 This marks a major turning point in 2025. The HDB concessionary loan rate remains fixed at 2.6% while bank mortgage rates have dropped significantly below that level. The numbers tell the story. OCBC reported seven times more HDB owners switching to bank loans this year. DBS saw a thirteen-fold increase in customers taking up its POSB HDB loan packages. For a loan of S$500,000 homeowners could save up to S$4100 annually in interest payments. The offer looks tempting but there is an important limitation. Once you switch from an HDB loan to a bank loan you cannot reverse the decision. Bank loans also carry more rate volatility compared to the stable HDB rate. Whether this switch makes sense depends entirely on your personal risk tolerance and financial situation.
Lock In Now or Hold Off? Timing Decisions Facing Homeowners
For most Singaporeans the current rates already reflect most of the expected easing that will happen. If your lock-in period ends soon then waiting for another big drop might not be worth it. The bigger wins right now come from locking in low fixed rates & negotiating rebates and choosing flexibility if future rates rise again. There will be another tightening cycle someday because that is just how interest rates work over time.
