SINGAPORE – Most home owners here still prefer to take fixed mortgages even though the interest rates for these packages have risen amid the Middle East conflict, and are now pricier compared to loans tied to floating rates.
Reasons cited include the desire for greater peace of mind amid the current market uncertainty, and to hedge against potential future rate hikes, bankers told The Straits Times.
Nevertheless, some home owners are making the switch to floating rate packages, which have been declining in line with the compounded Singapore Overnight Rate Average (Sora) rates.
Floating-rate loans are typically pegged to the three-month compounded Sora, which banks use to price mortgages here – namely by adding a fixed percentage, called the spread, to cover their costs and profit.
Fixed-rate packages have become more expensive as global interest rate expectations rise and central banks are expected to slow their pace of interest rate cuts to counter the impact of the Middle East tensions on inflation.
Interest rates in Singapore largely track global rates because the Republic manages inflation through its exchange rate, rather than by setting interest rates.
If global rates are expected to rise, Singapore rates must go up too or money will flow out, weakening the Singdollar.
Ms Maryanne Phua, head of home loans at OCBC, said fixed rate packages have increased by 0.1 to 0.2 percentage points this year, tracking higher long-term market interest rates.
The rates are now edging towards 2 per cent, but remain far from the peak of 4.5 per cent reached in late 2022.
Meanwhile, floating-rate home loan packages offer lower interest rates than fixed-rate packages as the one-month and three-month compounded Sora rates come down to around 1 per cent, from a high of 3.8 per cent in late 2023.
That spread has dipped to between 0.2 and 0.35 percentage points in 2026, from a range of 0.7 to 1 percentage point in late 2022.
The lower rates have prompted some homeowners to switch to floating-rate packages.
Ms Chelsea Ling, head of deposits and secured lending for the consumer banking group at DBS Singapore, said that while fixed-rate packages remain popular in 2026, there is a clear shift towards floating-rate options for completed properties.
The share of floating-rate packages doubled quarter-on-quarter in the first quarter of 2026, she said, adding that fixed-rate loans were more popular between 2023 and 2025.
Ms Jacquelyn Tan, head of group personal financial services at UOB, noted that the bank has also seen growing interest in its floating-rate loan packages.
Application volume grew by more than 5 per cent quarter-on-quarter for the period ending March 31. 2026, she added.
Ms Tan noted that fixed-rate home loans continue to be a preferred choice for many other home buyers.
“These customers value the certainty in their monthly repayments as it enables them to plan and manage their budgets better.” she said.
OCBC continues to see more interest in fixed-rate packages. Ms Phua said fixed-rate options are consistently more popular among buyers of completed properties.
She added that about 85 per cent of customers took up fixed-rate home loans in 2026, up from 2025, when 80 per cent of customers chose the fixed-rate option.
This compares with almost 100 per cent of home buyers who took a fixed-rate loan in 2024.
“The general economic uncertainty might have driven the demand for rate certainty,” Ms Phua noted.
Real estate agent, Eugene Tay, who is a group district director at Huttons, said many buyers prefer fixed rates to hedge against potential rate hikes.
Mr Tay cited an example of a friend who opted for another fixed-rate package over a floating-rate one because the current offers remain more attractive than his existing 2.75 per cent deal, despite the recent rise in rates.
Senior lab technician Dallas Goh refinanced his bank loan for his Housing Board flat in March with OCBC.
He chose a three-year fixed rate package at 1.55 per cent even though a comparable floating rate package was about 1.4 to 1.5 per cent.
“I decided to go for a fixed-rate option in case the war drags on and inflation rate spikes again,” he said, adding it is better to lock in his home loan rate now.
For other home owners who are undecided on what to do, financial advisers suggest that they go for a fixed-rate home loan.
Mr Alfred Chia, chief executive of advisory firm SingCapital, said no one knows where interest rates will go.
In case interest rates surge because of oil prices, Mr Chia said: “As a home owner, I do not think you want to subject yourself to that kind of shock.”
“If you fix your home loan rates, at least you know how much you need to spend on your mortgage every month, for the next two to three years,” he added.
The home owner can then review in two to three years’ time and decide if he wants to refinance to another fixed- or go for a floating-rate mortgage.
Furthermore, the interest savings between the fixed and floating rates may not be that much, Mr Chia said.
“The Sora rate has actually fallen in excess of the economic fundamentals. Sora has little room to fall based on the current situation,” he added.
Mr Clive Chng, associate director at Redbrick Mortgage Advisory, noted that there are some home loan packages which offer free conversions during the lock-in period.
The home owner thus has the flexibility to take a two-or three-year fixed-rate mortgage for example, and switch to another package after the first year.
“Some choose to hedge with a fixed-rate package first, with the option to move to another package if circumstances change,” he said.
Similarly, there are also home owners who go with a floating-rate package now and use the free conversion option to switch to another package later, he added.
DBS’ Ms Ling said these free conversion features offer customers flexibility as they can switch to any prevailing package at any time to manage interest rate changes.
Besides taking a home loan from a bank, HDB home owners have an additional option of taking a loan from the HDB, unlike private property owners who can only take a mortgage from banks.
The concessionary interest rate for HDB housing loans is pegged at 0.1 percentage points above the CPF Ordinary Account’s interest rate, which is 2.5 per cent.
The rate has stayed at 2.6 per cent for the past two decades and some home owners may be tempted to refinance their HDB loans, with bank mortgage rates relatively lower now.
Mr Casey Cheah, a would-be home owner in his 30s who is waiting for his Build-To-Order (BTO) flat, is not enticed.
He said that while he may be able to get a lower interest rate from the bank for the first three years, a housing loan is a long-term commitment.
“If interest rates go up after three years, I have no choice but to accept whatever is the prevailing interest rate from the bank then,” he added.
“Why stress myself every three years when I can sleep in peace on a HDB rate of 2.6 per cent for two decades,” he noted.
Mr Chia said HDB home owners have to remember that once they switch to a bank loan they cannot go back to a HDB loan.
Interest rates may be low now but if rates go back up, home owners will find themselves paying a higher interest rate than what the HDB home loan would have charged.
“I always tell HDB owners unless you plan to sell your HDB in the next three years, do not refinance with a bank because you have a 10- to 20-year horizon,” he said.
“It is a one-way ticket. If you refinance with a bank, you cannot go back to a HDB loan,” he added.
