That’s the million dollar question to ask if you have a mortgage up for review in 2026. Few brokers will dare to venture a prediction.

At the start of last year 2025 when SORA started drifting lower from 3%, few believe it can go below 2% let alone all the way to near 1% today.  After all, the narrative of the day then was that interest would stay “higher for longer” in the new world order of tariffs, onshoring, “friend-shoring”, etc.  In other words, inflation is here to stay.

The precipitous fall actually came in the second half from July onwards when SORA began pricing in multiple Fed rate cuts.  It ended 2025 with a spectacular almost 200 basis point (2%) fall from 3% to 1.2%!

For those who are expecting interest to soften further from here, you may have observed with some annoyance how the daily overnight SORA has been stuck rangebound in 0.90% to 1.50% for four months now since September 2025, notwithstanding three rate cuts by Fed in that period.

SORA would typically start off each new month lower, before rising slowly as liquidity dries up in the interbank market towards the end of the month. Should this pattern persists going into 2026, then 1-month and 3-month SORA (which are merely moving averages of the daily SORA) would certainly already be at the lowest point in this cycle at 1.00-1.10%.

No one knows exactly when SORA is going to start pricing in more rate cuts from Fed in 2026 with the first FOMC slated for end of the month 27-28 January.  Analysts are largely expecting Fed to hold rates in this first meeting, with the first cut coming in March.

Whoever is the new Fed Chair pick by Trump which will be revealed anytime now, he or she is almost certainly going to lean on the dovish side on monetary policy.  Most analysts expect at least one or two more cuts in line with Fed’s own medium dot plot last December showing one cut in 2026 and one more in 2027, albeit against a wide spectrum of dots to end 2026 with from 2.125% to 3.875% indicating a lack of consensus amongst officials.

For those who are expecting interest to soften further from here, you may have observed with some annoyance how the daily overnight SORA has been stuck rangebound in 0.90% to 1.50% for four months now since September 2025 notwithstanding three rate cuts by Fed in that period.

On the whole, everything seems to point to further downward bias on interest rate in 2026, if we assume SORA will once again factor in those rate cut expectations at some point.

But that’s exactly where the risks lie as well.  Will Fed overdo those rate cuts in the midst of tariff-induced price increases, leading to a return of inflation with a vengeance in the second half of 2026?  If that’s to happen, Fed will find itself in a catch-22. We might then go into another rate hiking cycle in 2027.

Does that bolster the case to lock down fixed home loan rates, after all they have crashed to tantalising levels of 1.30-1.60% way below historical average of 2% long-term borrowing costs for mortgages in Singapore?

That’s a reasonably fair perspective.  However, the right time to lock down a fixed rate is not in a cycle trough, but when interest has started or is just about to escalate in the next monetary tightening cycle.  You run every risk of being stuck on a fixed rate should we go into another prolonged period of cycle trough which typically lasts longer than peaks (see interest cycle).

The risk of a major market reset or rebalance has also risen with rising 10-year yield (despite multiple rate cuts at the short end) and a bull run on Gold alongside risk assets in an unusual correlation as if an imminent crash is coming.  When we do get one at some point, interest rate might come tumbling down almost in a straight line like what happened at the onset of covid-19.

Will Fed overdo those rate cuts in the midst of tariff-induced price increases, leading to a return of inflation with a vengeance in the second half of 2026?  If that’s to happen, Fed will find itself in a catch-22.

So then what’s the best thing to do when it comes to mortgages in 2026? Should homeowners go with fixed rate or floating rate?

I can only say this – 2026 looks set to be a watershed year for mortgage interest.  Don’t be too sure yet which way it will swing as some homeowners found out the hard way in 2024 how things can change drastically in the span of less than 12 months.  For this reason, we place a high premium on optionality in home loan packages, not just the lowest headline number.

The truth is we’ll only know on hindsight – by the end of the year or early 2027 – whether SORA has indeed reached its lowest point in the current cycle at close to 1% today.

Having said that, speak to us if you have a home loan which comes up for renewal in the next few months as we do have a winning solution which solves all the conundrum.  Take all the guesswork out and emerge a winner in mortgages no matter which way interest moves in 2026.  Let’s just say that this solution is once-in-a-decade rare, but few appreciate or understand.

At MortgageWise, we help clients navigate through the myriad of mortgage rates quick and fuss-free and get you the best home loan Singapore! Be it for residential or commercial property loan, work with us today!

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