Fixed Rate Home Loan Package

What it is

A fixed rate package is a mortgage structure where the bank agrees to hold your interest rate steady for an agreed stretch of time, commonly two to five years in Singapore, rather than letting it move with the market every few months. During that fixed period, your monthly instalment does not change because of interest rate movements, which some buyers value for the certainty it gives their household budget.

How it works

Once you choose a fixed rate package, the agreed rate applies for the whole fixed period, no matter which way market benchmarks such as SORA move during that time. When the fixed period ends, most loans automatically revert to a floating rate structure unless you actively refinance with the same bank or move to another bank. Fixed rate packages usually come with a lock in period covering the fixed years, meaning a redemption penalty can apply if you repay the loan early or refinance away during that window.

A simple worked illustration

Say a buyer takes a fixed rate package at an illustrative rate of 1.5 percent per year for the first three years of a 25 year loan. For those three years, the monthly instalment stays the same even if market rates rise or fall elsewhere. From year four onward, unless the buyer refinances, the loan typically moves to a floating rate, and the instalment can then change as that floating rate moves. This is a rounded, made up example to illustrate the structure, not a real quoted package.

What first time buyers get wrong

• Assuming the fixed rate lasts for the whole loan tenure, when in Singapore it usually only applies to the first few years.
• Overlooking the lock in period and redemption penalty that often come with a fixed rate package, which can matter if plans change and you need to sell or refinance early.
• Comparing only the headline rate between a fixed and a floating package without also comparing the length of the fixed period and the lock in terms.

What to check

Ask exactly how many years the fixed rate actually applies for, what rate structure the loan reverts to afterward, and what the lock in period and redemption terms are. Rates and terms differ across banks and change over time, so confirm the current details directly with banks or MAS rather than relying on an example. Winfred does not recommend a specific bank or package, this page explains the general structure only.

Winfred Quek is an Associate Marketing Consultant at Crestbrick Pte Ltd (CEA Licence No. L31010886H). CEA R073319H. This page is for general information only and does not constitute financial, investment, or legal advice. Verify current figures with IRAS, HDB, CPF Board, or MAS before making any decision.