Money · 2026
Fixed vs floating mortgage Singapore: the decision, not the rate
By Winfred Quek · 11 minute read · Last reviewed August 2026
Rates and thresholds change. The current figures are kept in one place: the Singapore property rules reference.
Facts verified: 17 August 2026 · Sources linked below
Key Takeaways
- • As of August 2026, 2 year fixed rates run approximately 1.6 to 1.65% p.a. SORA has fallen sharply this year, so 3 month compound SORA plus bank spread now prices floating at roughly 1.6 to 2.3% p.a.; the most competitive floating packages now match fixed, though standard packages can still price meaningfully higher, making the decision about risk tolerance, not rate chasing.
- • Lock in penalty for early repayment or refinancing is typically 1.5% of the outstanding loan. On a S$1.2M loan, that is S$18,000, enough to wipe out 18 months of rate savings from switching.
- • According to MAS Notice 645, TDSR stress tests at 4% p.a. meaning your loan quantum is already sized to withstand rates above current market levels, reducing the case for paying a premium for fixed rate certainty.
- • Board rate packages (pegged to internal bank rates, not SORA) should be avoided: the bank can reprice upward at will with 30 days' notice. Always choose SORA pegged floating if you want a floating package.
- • Best time to refinance: 3 months before lock in expiry. Switching banks takes 8 to 12 weeks and any gap outside lock in burns you on board rates. Calendar the refinancing window the day you sign.
The wrong question is "which rate is lower today?" The right question is "which structure matches my cashflow stability, my hold horizon, and my view on the rate cycle?" Most buyers I meet have been shown a comparison sheet from a mortgage broker with the headline rate circled, and no framework for thinking about the decision.
This piece is the framework. SORA mechanics, the lock in traps, board rate games, and the specific cases where fixed wins over floating (and vice versa). If you're about to sign a loan facility letter in 2026, read this first.
1. The three main package types in Singapore
Singapore banks offer three broad mortgage structures: fixed rate, SORA pegged floating, and board rate floating. Each has very different risk characteristics even when the headline rate looks similar.
- Fixed rate: Locked rate for the fixed period (typically 2 or 3 years), after which it converts to a floating structure. The lock insulates you from rate moves during the fixed period. Early redemption penalty (1.5% of outstanding) usually applies within the lock in.
- SORA pegged: The loan rate = 3M or 1M compounded SORA + a bank spread (typically 0.8 to 1.2%). SORA moves with MAS policy and market conditions. Transparent and formula based.
- Board rate: Bank sets the rate at its discretion. Less transparent. Banks historically raise board rates faster than they drop them. Generally least attractive unless paired with a specific promotion.
Real Example: $1.4M Condo, Fixed vs Floating Over 8 Year Hold
| Detail | Fixed 3Y (1.65%) | SORA Floating (SORA+0.85%) |
|---|---|---|
| Profile | SC couple, $14,000/month combined income, 8 year hold, $1.4M condo, 75% LTV loan = $1,050,000, 25 year tenure | |
| Year 1 to 3 rate | 1.65% fixed | ~1.95% (SORA 1.1% + 0.85%) |
| Monthly instalment (Yr 1 to 3) | $4,274/month | $4,425/month |
| Saving vs floating (Yr 1 to 3) | +$151/month = ~$5,400 over 3 years | N/A |
| Year 4+ rate (after fixed period ends) | Converts to SORA+0.9% (~2.0%) | SORA+0.85% (same, no change) |
| Lock in penalty if selling at Year 2 | 1.5% of outstanding ~$981k = ~$14,700 | None (2 year lock in with sale waiver) |
| Best for | Stable income family, 8 year hold, no expected early sale, wants cashflow certainty for years 1 to 3 | Investor expecting to refinance at Year 2, or planning a sale within 3 years |
| Total interest Year 1 to 3 | ~$49,000 | ~$59,000 |
| Verdict for this client | Fixed 3Y wins by ~$5,400 in cashflow and ~$9,100 in interest over Years 1 to 3, with no execution risk given planned 8 year hold | Only preferred if SORA falls a further 0.3%+ within 18 months, which is speculative |
Illustrative August 2026 example. Rates indicative; the 1.65% assumes 3 year fixed prices at the top of the current 1.6 to 1.65% band quoted for 2 year terms. Always get live quotes from 2 to 3 banks before committing. SORA movements can shift this analysis materially.
2. SORA mechanics, the only floating rate worth tracking
SORA (Singapore Overnight Rate Average) is the interbank overnight lending rate. 3M compounded SORA is the most common mortgage peg, the average of daily SORA readings over the prior 3 months, compounded. This smooths volatility: even if overnight rates spike, your 3M compounded SORA changes gradually.
As of August 2026, 3M compounded SORA has fallen to around 1.0 to 1.2%, down sharply from earlier in the year. Bank spreads on SORA pegged mortgages range from roughly 0.5% to 1.2% depending on the bank, loan size and customer segment, tighter for the most competitively priced packages. Effective all-in floating rate: approximately 1.6 to 2.3%.
2 year fixed rate packages are pricing at approximately 1.6 to 1.65% across the major banks as of August 2026, confirm the current 3 year fixed rate directly with your bank. The fixed floating gap has narrowed sharply since earlier in 2026, when floating still carried a real premium over fixed.
3. Lock in and redemption penalty, the real cost
Every fixed rate package has a lock in period (typically 2 or 3 years matching the fixed tenure) during which early redemption triggers a penalty, usually 1.5% of the outstanding loan. On a S$1M loan, that's S$15,000.
What triggers redemption? Selling the property, refinancing to another bank, or making a large lump sum repayment beyond the allowed prepayment window. The last one catches many clients who come into bonus/sale proceeds and want to reduce principal, only to find the penalty wipes out the interest savings.
4. When fixed rate wins
Fixed rate is the right answer when any of these apply:
Cashflow constrained household
If a 1% rate rise would materially compromise your monthly budget, fixed rate is insurance. The premium (if any) is the cost of sleeping well. TDSR-tight borrowers who scraped through approval cannot absorb floating rate shock without life adjustments.
Tight TDSR at origination
Even though MAS stress tests at 4%, a hard TDSR case may be 1 percentage point from the limit in reality. Locking in protects you from triggering stress scenarios at refinancing.
No strong view on rate direction
If you don't have a specific thesis on where rates go, fixed rate removes one variable. Most homeowners are not professional rate watchers and shouldn't pretend to be.
Short term certainty required
If you're planning a family, career change, or sabbatical where cashflow needs to be rock stable for 24 months, fixed matches that need.
5. When floating wins
Floating is the right answer when any of these apply:
Short hold horizon
If you're planning to sell within 12 to 18 months (post SSD window), you don't want to be stuck with a 2 year or 3 year lock in and its redemption penalty. Floating with a short lock in (or a redemption on sale waiver) matches the exit timing.
Rate cut thesis
If your view is that policy rates will fall materially over the next 12 to 24 months (e.g., global central bank easing cycle), floating captures the downside. You can always refinance to fixed later if your view flips.
High income, cashflow resilient
If a 1 to 2% rate rise is absorbed by household cashflow without stress, you don't need the insurance that fixed provides. Floating tends to have lower structural spread over a 10 year horizon.
Planning to refinance or restructure within 24 months
If you anticipate refinancing (say, due to an upcoming restructuring or property restructure), a fixed rate lock in becomes a problem. Floating with shorter or no lock in gives you optionality.
6. What Is the Board Rate Trap and Why Should You Avoid It?
Board rate packages are the least transparent. The bank publishes a board rate and can adjust it at its discretion (with appropriate notice per MAS guidelines). Historically, board rates have:
- Risen faster than they fall, banks protect margins when funding costs rise.
- Been slower to pass on cuts when SORA drops.
- Featured in "teaser rate" packages where the Year 1 rate is attractive and Year 2+ reverts to a materially higher number.
In 2026, I rarely recommend board rate packages unless the specific combination of rate, lock in, and fee structure is clearly superior. Transparency matters over a 25 year loan tenure.
7. The 3 year decision, a worked example
Client with a S$1.5M loan, 30 year tenure, 8 year likely hold. Three packages on the table in April 2026:
| Package | Year 1 to 3 rate | Year 4+ rate | Lock in |
|---|---|---|---|
| Fixed 3Y | 3.05% | SORA + 0.9% | 3 years |
| SORA pegged floating | SORA + 0.85% (~3.55%) | SORA + 0.85% | 2 years |
| Board rate 2Y teaser | 2.85% Y1, 3.55% Y2 | Board rate (3.75%+) | 2 years |
Which wins depends on the rate path. If SORA stays flat or rises, the Fixed 3Y saves ~0.5% for 3 years = ~S$22,500 on a S$1.5M loan. If SORA falls 0.75% over 18 months, the floating wins. If you plan to sell at Year 3, Fixed 3Y lock in ends exactly on schedule, no penalty, maximum benefit.
For a stable income family with an 8 year hold and no strong rate view, Fixed 3Y is the usable middle path. For a high income investor who may exit at Year 2, floating with a short lock in is cleaner.
Postscript: by August 2026, 3M compounded SORA had fallen to around 1.1%, well past the 0.75% trigger in the falling rate branch, so the floating chooser won this round. The framework held; the inputs moved. Rerun the same comparison with today's 1.6 to 1.65% fixed rates against SORA plus spread before deciding.
8. When Should You Refinance and How Do You Time It Correctly?
Refinancing (switching banks) typically becomes attractive 3 to 6 months before lock in ends. The process: get indicative offers from 2 to 3 banks, compare all-in cost (rate + fees + legal costs), apply, and close within the lock in window to avoid the old bank's penalty.
Legal subsidy (typically S$2,000 to S$3,000 for refinancing) and cash rebates are part of the all-in comparison. Some banks clawback these if you refinance within their new lock in. Read both sides.
A realistic cadence: re evaluate the mortgage structure every 2 to 3 years. Not monthly. Not never. Twice in a decade.
9. What mortgage brokers don't tell you
- Package availability is loan size dependent. Rates advertised for S$1M+ loans aren't offered at S$500k loans. Check your specific tier.
- Variable income buyers get worse packages. Self-employed, commission based, or foreign income buyers often see a 0.2 to 0.4% higher spread. Bring all income proof to get the best offer.
- Co-borrower composition matters. Having a low income spouse as co-borrower can reduce the effective rate by expanding TDSR headroom, but also complicates restructuring later.
- "Promotional" rates are for new purchases only. Existing customers refinancing internally usually get worse rates than new to bank offers.
10. How this fits the Money side
In the Property Portfolio Analysis, the mortgage structure sits on the Money side, it's the single largest recurring outflow for most households. The right structure isn't the one with the lowest headline rate. It's the one that matches your cashflow stability, your exit horizon, and your view on the cycle.
Run through the affordability calculator with a 1% rate shock before signing any package. If your margin is tight, fixed rate is cheap insurance. If your margin is healthy, floating gives you optionality.
The worst answer is "whichever has the lowest rate this week." That's the non-decision most buyers make by default.
Book the Property Portfolio Analysis
Two hours. We review your actual mortgage options, stress test cashflow at plus 1% and plus 2% rate shocks, and pick the structure that matches your horizon, not the one with the best flyer.
Winfred's Take
The fixed vs floating decision is mostly overthought. With TDSR stress tested at 4%, MAS has already validated that your loan is affordable even if rates rise significantly. The classic question was whether a 0.2 to 0.3% fixed premium is worth the cashflow predictability; as of August 2026 the premium has inverted, with 2 year fixed at 1.6 to 1.65% pricing at or below SORA packages running 1.6 to 2.3% all-in. When the market pays you to take certainty, take it: fixed is the rational default for most salaried borrowers today, including the 8 year hold profile in the worked example above. Floating earns its place if you expect SORA to fall further, or if you need the exit flexibility of a short lock in with a sale waiver. Decide on structure and flexibility, not on a rate view you cannot verify.
Related reading
- Portfolio blueprint on one income
- HDB MOP to condo upgrade: the full timeline
- Reading the latest cooling measures
- Restructuring break even math
- Affordability calculator
Want to apply this to your own situation?
Book a 30 min Property Portfolio Analysis with Winfred. No pressure, just honest numbers.
Book a free property portfolio analysis callWinfred Quek is an Associate Marketing Consultant at Crestbrick Pte Ltd (CEA Licence L31010886H), advising Singapore upgraders, investors, and family offices. CEA R073319H. The information on this page is general and does not constitute financial, investment, or mortgage advice.
Get Winfred's next analysis in your inbox
One property insight per week. No listings, no spam.
Frequently asked questions
What is SORA and how does it drive floating mortgage rates?
SORA (Singapore Overnight Rate Average) is the interbank overnight lending rate; 3 month compounded SORA is the most common mortgage peg, smoothing volatility so your rate changes gradually even if overnight rates spike.
When should you refinance a Singapore mortgage?
Refinancing typically becomes attractive 3 to 6 months before lock in ends: get indicative offers from 2 to 3 banks, compare all-in cost (rate plus fees plus legal costs), apply, and close within the lock in window.