Before we even get to the question of 1 per cent, let’s talk about 2 per cent first which is a foregone conclusion but not everyone knows – 1-month compounded SORA has broken below the psychological 2 per cent level in recent weeks (1.9847% on 13 Jun and 1.7932% as of 27 Jun), to be joined by 3-month SORA relatively soon.

It’s official now.  In a preview of what’s to come for mortgage rates in Singapore, mortgage rates have dipped below 2 per cent for the first time (1.99 per cent as of 27 Jun 2025) based on 1-month SORA + 0.20 per cent spread, applicable for loans above $1 million (conditions apply).

With that let me declare that, if current trend persists, mortgage rates in Singapore be it fixed or floating will soon go back to the sub-2 per cent level and to trade rangebound between 1.30 to 1.80 per cent.  This will happen once Fed enacts at least one or two more rate cuts widely-expected before the end of the year.

What’s going on?  Aren’t rates supposed to stay higher for longer?  Apparently that rhetoric does not hold water.  In fact, nothing is certain these days, so be careful what you subscribe to.

After running high in the last three years since U.S Fed went on a rampant tightening cycle from 2022, interest rates are finally normalising – with floating rates now going back below fixed rates in normal interest cycles, where it costs more to borrow for longer duration.

If you have worked with the MortgageWise team, this is what we’ve been warning clients since middle of 2024 when the spot (or daily) SORA starts to fall steadily – that optionality of a free conversion within the lock-in period is almost non-negotiable, with fixed rates still hovering near 2.9-3.0 per cent then.

Still, the pace of fall in SORA has caught even those in the industry by surprise, after all Fed has yet to resume any rate cut since it hit the pause button in Dec 2024 after shaving off a full 100 basis points (1 per cent) to bring fed funds rate down from 5.50 to 4.50 per cent in 2024.

Mortgage rates in Singapore be it fixed or floating will soon go back to the sub-2 per cent level and to trade rangebound between 1.50 to 1.80 per cent. 

With sub-2 per cent a foregone conclusion, let’s come back to the topic of this article which is a much harder question – just how low can SORA go from here? After breaching 2 per cent threshold, will it crash all the way below 1 per cent?

Learning from the past – never say never.  Remember SORA started its ascent from the low point of 0.10% back in 2021.

Imagine if U.S. Fed were to cut another 100 basis points for fed funds to reach a higher neutral rate of 3.50 per cent, that might be enough to tip SORA below the next psychological level of 1 per cent? (neutral rate is the level of interest rate where it’s neither restrictive nor stimulative to the economy)

But what if tariffs negotiations stall with businesses passing the increased cost to consumers resulting in prices flaring up again, which forces the hand of Fed to hike rates instead in 2026?

That’s not our base case as all signs are pointing to lower rates ahead, including a likely slowdown in economic growth.  Speak to our team of mortgage strategists for more insights and analysis on this.

Perhaps, to end, let me leave you with some arguments for and against returning to a low interest rate environment.

The strongest opponent to a low-rate environment lies in how the world has become much more expensive to do business with rising protectionism and geo-political tensions, hence prices will stay higher which necessitates a higher neutral rate.

However, the strongest proponent to that see much hope in how massive adoption of A.I. within the next 5 to 10 years will bring about productivity gains to keep price pressure down.

Who’s right?  We’ll have to watch how things play out.  One thing for sure.  Even if SORA indeed goes back below 1 per cent by 2026, you can only reap that benefit if you act fast and decisively today.  Find out why so when you speak to us.

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Disclaimer: MortgageWise Pte Ltd is not in the business of providing financial advice nor are we licensed or regulated by MAS under the Financial Advisory Act (FAA) in Singapore. All information presented are opinions and any representations given, whether by way of example, illustration or otherwise, are purely portfolio allocation advice and not recommendations or inducements to buy, sell or hold any particular investment product or class of investment product.  All opinions are generic in nature and are not tailored to the particular circumstances of any reader.  Seek advice from a qualified financial advisor before making any investment decision.

Though every effort has been made to ensure the accuracy of the information and figures presented, we make no representations or warranties with respect to the accuracy or completeness of the contents in this blog and specifically disclaim any implied warranties or fitness for a particular purpose.  We shall not be held responsible for any financial loss or any other damages suffered whatsoever, directly or indirectly, if you choose to follow any of the advice or recommendations given in this blog.