This is a follow-up article to the one written end-June when the precipitous fall in SORA first started, to which I floated the question of a 1% SORA?

Though we’re not always right, but looking back at this article now, we’ve gotten most of our forecast right.  SORA had indeed traded rangebound 1.30 to 1.80 per cent through this period. What’s more, the daily overnight rate is now teetering at the edge of 1% exactly as what we’d expected.

Besides markets pricing in expected rate cuts by Fed in the second of the year leading to a falling SORA, another factor which contributes to rapidly-falling fixed mortgage rates has been the repricing action from lenders themselves.

Banks have been unusually aggressive in retaining existing clients from what we observed in recent months. Since mortgage is somewhat like a commodity where it’s hard to differentiate other than lowering rates, banks’ fierce competitive actions to stop customers from churning indirectly accelerated the pace of the drop squeezing their own margins further. We’d already seen that in the NIM (net interest margin) reported from local banks’ latest results and it’s going to get much worse going into 2026 if SORA drops below 1%.

The good news in all this, however, is that homeowners stand to benefit the most especially if you are able to capture that drop in rates when it happens. Remember, U.S. Fed is not quite yet done with rate cuts with a change in Fed chair coming up by May 2026.

SORA had indeed traded rangebound 1.30 to 1.80 per cent through this period. What’s more, the daily overnight rate is now teetering at the edge of 1% exactly as what we’d expected.

How we anticipate the direction of travel for interest rate, or the most probably path, is always based on the interest rate cycle.  You could, in fact, gather quite a handful of insights following just that than the advice from bankers or those with an agenda to sell to you specific package.  Speak to our consultants to find out more our forecast for 2026.

Notwithstanding much debate on the path of rate cuts by Fed and how, as I read, some experts think that the bulk of rate decline had already taken place hence banks seem to tout the stability and peace of mind from a fixed mortgage rate today at 1.50%, the truth is no one knows just yet where’s the lowest point.  If you consider SORA started climbing from as low as 0.10 per cent back in 2021.

What about the likelihood of interest rate going in the opposite direction?

As I write this, President Trump has just signed executive order to exempt from his high tariffs a whole range of agricultural food imports like coffee, beef, tomatoes and many other groceries in a bid to bring prices.  The list of items for tariff roll backs may get expanded in the days ahead as the White House and Republicans face backlash from rising prices as seen in its dismal performance in recent mayor elections, albeit these were in traditional Democratic stronghold states.

Still, the roll backs inadvertently constitute an admission in some ways that tariffs had indeed led to businesses passing on higher costs to U.S. consumers in higher prices.  And things may get worse the longer tariffs are in place.

There are always two sides to look at.  Certainly, sticky inflation which seems to be firming up over the months before the data blackout caused by government shutdown, justifies the hawkish rhetoric from Fed officials of late.  The odds of a final rate cut in December has been pared back.  However, I can also argue that the latest tariffs exemption on staple food products might in fact alleviate concerns of Fed officials and free them to cut, so as to put more emphasis on their other mandate of the labour market, now that food prices may get some relief.

Our base case here is that bias is still downwards for SORA going into 2026 whether we get rate cuts in December or not.  It certainly will not fall more than 150 basis points (1.50%) unlike in 2025, but it is not inconceivable or insignificant to cut your interest cost by half from current levels if SORA crashes way below 1%, especially if you’re still paying $10,000 in mortgage interests every year on a typical loan of $700,000.

The question is how low can it go?  With 1-month and 3-month SORA likely reaching 1% in the next few months, have we seen SORA at its lowest point or will it crash below that?

You might think it’s impossible to catch the lowest point much like stock investing, but this is where mortgage planning differs – you can!  If you take fast action today based on the spreads you get to contract with the banks today.  You just do not know when that will happen, if it happens.

However, you’ll also need to make sure you know how to hedge the risk involved and plan for contingencies if your bets go wrong.  Which way to bet?  Look at the interest cycle again, or speak to us.

You might think it’s impossible to catch the lowest point much like stock investing, but this is where mortgage planning differs – you can!  

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 and you’ll also be helping to support our social cause!

So, be it for residential or commercial property loan. Work with us today and you’ll also be helping to support our social cause!

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