As of end July 2025, we are seeing banks starting to offer 3-year fixed mortgage rate at 1.96 per cent albeit for bigger loan quantum of above $2 million.

What that means is that very soon, you’re going to see fixed mortgage rates come down to the 1.80-1.90 per cent level for the mass market loan sizes of $500,000 to $1 million.  Floating or variable rate home loans will go even lower to 1.50-1.80 per cent as SORA continues its descent especially when U.S. Fed resumes it rate cuts widely believed to be in September.

With floating home loan rates back in favour, should you be considering that instead of opting for the “safer” fixed home loan rates which has become the default option for most homeowners during the past few years?

As mortgage professionals, this is an interesting question which calls for more thoughts and introspection as we see too many homeowners being, perhaps unnecessarily, held back by fear after being scalded by their experience of paying high interest since 2022.

One narrative goes like this: “It’s ok to go for 3-year fixed now at 2 per cent as interest rate has come down by so much, I rather have the peace of mind and certainty of knowing how much I need to pay every month”.

But do you know that if interest rate is going to dive by a full 100 basis points (or 1 per cent) over the next few years, on a typical private property mortgage loan of $800,000, you’ll end up paying the bank over $8,000 in a year or close to $24,000 over the 3-year lock-in period?

While there’s really no right or wrong but a question of how much you rather be paying in interests to the bank when it comes to choosing between fixed versus floating rate, you can certainly capture maximum savings if you look at this decision from seven aspect using our simple framework below which spells C.A.P.T.U.R.E.:

Cycle

Without doubt, the number one consideration must be on the interest rate cycle – following that closely gives you the highest probability of getting this decision right, as what goes up eventually comes down and vice versa.

Innately, all mortgage decisions involve a view on the most probable direction of move for interest rate.  Knowing at which point in the cycle you’re at can tell you a lot of which way to bet.  

Rather than staying on fixed rate at above 2%, you will certainly win big on floating if SORA crashes to 1 per cent or lower (that’s almost like halving your interest costs!) when U.S. Fed resume its cuts going into 2026.  In order to bet, you must first know the wager and how much can you afford to lose?

Afford to lose?

Many have the view that rates are going down but remain fearful of opting for floating rates.  However, they’ve also conveniently forgotten how they’d just emerged and survived one of the fastest rate hikes on record when SORA went all the way to peak at 3.70 per cent in 2023!

How much worse can it get now that inflation (in the U.S.) is no longer at 9 per cent, and you have a U.S. President who is breathing down the neck of the current or the next Fed chair for more rate cuts?

The best way to tackle fear is to face it squarely.  Often, you’ll realise “it’s not that bad” after all.  What’s more, there are ways to mitigate the risks of the bet going wrong like having a shorter lock-in period or the option of a free conversion should you need to change track halfway.  Speak to our mortgage strategists to find out more.

Personality

Personality play a large part as all purchase decisions are ultimately based on emotions and most of us simply use the rational side of our brain to justify the decisions after they are made.

If you really feel uncomfortable with a floating mortgage rate as you’re unsure which way interest is going to go, as no one can guarantee the outcome a 100%, you might be better off forgoing the chance of gloating over a 1 per cent mortgage rate.

Still, unless you’re resigned to always opting for a fixed rate throughout the entire mortgage term of 25-30 years, there will be periods or seasons when you might just want to stick your neck out for a trial to benefit from the lower floating rates.  What better time to do that when the cycle goes into a trough?

Total

What’s the total sum involved here?  I’m talking about the absolute dollar amount involved, i.e. the loan quantum.  Obviously, you have a lot more to lose with a wrong move when you’re paying a mortgage loan of $2 million versus $200,000.

This is where it gets interesting too as it cuts both ways:  With a bigger loan, there’s more bang for your bucks taking a bet on floating rates should interest rate crash to 1% by 2026.  Yet, you can also argue that there’s much less to lose in absolute terms with a smaller loan, so why not bet on floating?  Who’s right?  I’ll leave that for you to ponder.  In a way, it ties back to the preceding point about personality.

Unloading (Selling the property)?

One important consideration not to overlook is your inclination on selling the property within the next few years as most mortgage loans come with a 2-year lock-in or commitment period, be it fixed or floating rate.  It will be silly to save on interests only to give them all back with a 1.50% (of the outstanding loan redeemed) penalty should you end up selling the property and redeeming the loan whilst locked.

In this regard, aim for a mortgage loan which provides a waiver of penalty on sale of property within the lock-in period. That’s more prevalent with floating home loan rate packages, as opposed to fixed rate packages, though there are banks who will offer that for both.

Rental income

Another consideration has got to do with whether the subject property is the roof over your head or an investment property which comes with a good source of rental income.

In the latter case, you are better prepared for the slightly more volatile nature of a floating home loan rate as a big part of the monthly repayment will be covered by the rent collected, especially in a falling rate environment.  Even in the more unlikely case of a pickup in interest rate, the rent can help to defray the additional repayment required.

Employment

Last but not least, with A.I. becoming a real and growing threat to job security over the next 10 years, it is prudent to consider if there are headwinds in your industry, company or the department where you’re working.

It will be hard to refinance your mortgage without an income especially for investment properties and you might be caught out later on a fixed mortgage rate which tend to revert to a much higher thereafter spread (the mark-up margin above SORA) when the fixed term ends.  Floating rate packages usually spot lower thereafter spreads than fixed rate packages but it also varies from bank to bank.

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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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.