With mortgage rates in Singapore likely to fall due to US Federal Reserve cuts, borrowers are wondering whether to opt for fixed-rate or floating-rate loans. While waiting for lower floating rates is tempting, our team recommends considering a 2-year fixed rate instead. Here’s why.
The Current Mortgage Rate Outlook
As of September, the US Federal Reserve cut interest rates by 50 basis points, and further reductions are expected through 2026. Singapore’s mortgage rates have historically followed US trends, rising and falling in tandem. However, local banks have already factored in these anticipated cuts, meaning that significant declines in mortgage rates may not happen as quickly as some borrowers hope.
Financial experts agree that while rates will continue to drop, they will likely do so steadily rather than rapidly. Wayne Quek, senior mortgage adviser at Home Loan Whiz, anticipates that the Singapore Overnight Rate Average (Sora) will decrease by around 10% in the next round of cuts but cautions that spreads may increase as the base rates fall, limiting the potential savings for borrowers with floating rate loans.
Why Consider a 2-Year Fixed Rate?
Given this environment, locking in a 2-year fixed mortgage rate might be better than waiting for floating rates to decrease. Fixed rates are currently lower than floating rates, and their gap may not close significantly in the next two years.
By securing a fixed rate now, borrowers can benefit from the stability of knowing their repayments will stay consistent. Even if floating rates eventually drop below the fixed rates, the potential gains will only materialize towards the end of the two years. By then, you will have already saved during the initial months when fixed rates are lower. Additionally, if floating rates remain comparable to or even higher than fixed rates throughout this period, borrowers with fixed rates will appear ahead.
Borrowers’ Advantage in a Competitive Market
Singapore’s competitive mortgage market means banks continually adjust their loan packages to attract new customers. Most fixed-rate packages have already factored in the anticipated rate drops, so today, borrowers can access rates that reflect these future adjustments. Darren Goh of MortgageWise.sg expects fixed rates to hover between 2% and 2.5% over the next two years, making now a good time to secure a deal before floating rates fall significantly.
What Should You Do Next?
If you’re considering your mortgage options, it’s essential to weigh the potential savings from a fixed-rate loan against the uncertain pace of floating rate adjustments. If you’re out of the lock-in period, we recommend reviewing your existing mortgage and consulting a mortgage adviser to explore current rates. Fixed-rate packages today offer attractive terms that can help you manage your financial commitments more effectively.
Interested in locking in the best mortgage rate? Check out the latest rates on our Mortgage Rate Page or apply for a loan through us to get personalized guidance and secure the best deal for your situation.
Share Your Thoughts
We’d love to hear from you! What are your thoughts on fixed versus floating mortgage rates in the current environment? Share your opinions and experiences in the comments below.
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