When buying a property in Singapore, one of the most important financial decisions you’ll face is choosing between floating rate and fixed rate loans. Both options have their merits, and the right choice depends on your financial situation, risk appetite, and outlook on interest rates. Mortgage rates are in a constant cycle, and they have shifted once again in recent years. As rates move from the peaks of 2023 and 2024 to the sharp drop in 2025 and beyond, the choice between the two remains nuanced.
The Difference Between Fixed Rate And Floating Rate Loans
Most home loan packages offered by banks allow homeowners to choose between fixed or floating interest rates.
Fixed loans lock in your interest rate for a defined period of one to five years, with two and three years being the most common fixed-rate terms. Because the interest rate is fixed, your monthly instalments remain constant, regardless of market fluctuations. However, the home loan will eventually transform into a floating rate loan.
Floating-rate loans are pegged to benchmarks like the Singapore Overnight Rate Average (SORA) or bank board rates. They change periodically, typically every one to three months, depending on the benchmark rate. That means your monthly instalment is likely to change every few months, depending on the market fluctuations.
Pros And Cons Of Fixed Loans
Because of the cyclical nature of mortgage rates, both fixed rate loans and floating rate loans share similar pros and cons. What might be an advantage for one at one point in the cycle, may turn out to be a disadvantage at another time.
#1 Predictability and Stability, But At A Price
Fixed loans provide certainty. Your monthly instalments remain unchanged during the lock-in period. This means you’ll know ahead of time how much you’re paying each month and can budget accordingly. However, such stability comes at a price.
Fixed packages often start slightly higher than floating ones. Today, fixed rates with a lock-in of two to three years hover around 1.55%, while floating rates typically start lower, with most banks currently offering rates starting at 1.48%.
#2 Protection Against Rate Hikes But Suffers An Opportunity Cost When Rates Fall
Fixed loans usually shine best during periods of rising interest rates. Fixed loans shield borrowers from sudden spikes. For example, mortgage rates surged above 4% in 2022, with high interest rates lasting till 2024. Homeowners who selected fixed packages in 2021 were mostly insulated and enjoyed paying a lower interest rate.
The opposite happens during periods of falling interest rates. When rates fall, as they did in 2025, borrowers with fixed rate loans will end up paying more. In the past year, the benchmark rate 3-month SORA dropped from 2.2% to 1.18%. This meant borrowers on floating loans saw their monthly instalments drop over time, while borrowers on fixed loans remain locked in at the higher rates.
Read Also: How Much Cheaper Will Your Home Loan Repayments Be If Interest Rates Drop By 0.5%
Pros And Cons Of Floating Loans
Just like fixed rate loans, similar pros and cons are true of floating loans, and usually they’re the direct opposite.
#1 Potentially Lower Rates, But Not Always
Historically, floating rates are priced lower than fixed rates. This is because banks recognise that the prospect of fluctuating mortgage rates is not enticing. Fixed rates often seem like the safer and more logical choice. Early last year, before it was clear how sharply the mortgage rates would fall, floating rates were priced higher than fixed rates, making them seem even less appealing.
#2 Don’t Overlook The Bank Spread
While floating loans are pegged to a benchmark rate, such as the 3-month SORA, they typically come with an additional rate known as the bank spread. For example, your home loan package may indicate 3M SORA + 0.35%. This means that you will need to pay whatever the 3M SORA rate is currently, as well as an additional bank spread of 0.35%.
Banks often keep the spread low when the benchmark rate is high but raise the spread when the benchmark rate is low. Just last year, spreads were as low as 0.25% because of the high SORA rates, and now they’ve creeped up to 0.35% and more. Expect spreads to go up to 0.5% or even 0.75% in the years to come.
#3 Enjoys Savings When Rates Fall But Suffers When Rates Rise
In contrast to fixed loans, floating loans shine best during periods of falling interest rates. When rates fall, as they did in 2025, the benchmark rate 3-month SORA dropped from 2.2% to 1.18%. This meant borrowers on floating loans saw their monthly instalments drop by one whole percentage point.
Obviously, when rates rise, borrowers on floating loans are the ones who pay the price. In the past decade, we’ve seen benchmark rates rise gradually, as they did between 2015 and 2019, but we’ve also seen them rise sharply, as in 2022, when 3M SORA jumped from 0.20% to 3.14% in a single year. 3M SORA would go on to reach peaks of 3.76% in 2023.
Current Market Context
As of March 2026, fixed rates are currently priced at around 1.50% to 1.80%. These are among the lowest rates in recent memory and are close to the historical lows banks have offered.
But floating rates also remain attractive, when many banks offering 3M SORA rates with a spread of 0.30% to 0.50%, which means they’re currently between 1.48% to 1.68%. As mentioned earlier, these bank spreads are still close to historical lows, although we can expect them to rise if the benchmark rate gets lower.
Which To Choose, Fixed Or Floating
Ultimately, the decision-making factor often boils down to one point. If you expect rates to rise in the near future, fixed loans are safer. On the other hand, if you anticipate benchmark rates to decline further, then floating loans could save money.
However, based on your individual circumstances, such as your financial goals in the near future, the decision may not be so straightforward. For example, if you’re planning to sell your property within the next year or so, the choice of fixed or floating is less urgent than picking the right bank package that only limits your lock-in commitment to a year. This will help you avoid paying extra unexpected and avoidable fees.
Fortunately, you won’t have to make the decision alone. Mortgage brokers in Singapore offer their time and advice to help you make the decision that is right for your individual needs. Since they are often paid the same commission rates by the banks they refer you to, they offer their services to you for free. Consider our friends over at RedBrick and Cashew.
If you prefer a DIY approach, Cashew offers a user-friendly platform to compare packages across banks based on your loan inputs. Additionally, Cashew’s advisors also assist you in applying for the preferred loan package, all from the comfort of your home.
Alternatively, RedBrick offers a more personalised experience, with its professional mortgage brokers sharing insights into the nuances of each loan package during a free, non-obligatory consultation. Check out our home loan guide for more information.
Ultimately, the best choice is to work with a mortgage broker who has years of industry experience. As we’ve mentioned consistently in this article, mortgage rates are cyclical, and only the most experienced brokers are aware of the nuances and can provide advice on choosing a fixed or floating rate that not only benefits you in the short term but also in the long term.
Read Also: HDB Loan or Bank Loan? Choosing The Right Mortgage Plan
