Last reviewed: 19 May 2026
SORA vs Fixed Rate Mortgage 2026: The Decision Framework With Current Numbers
By Winfred Quek · CEA R073319H · Crestbrick
Facts verified: May 2026 · Sources linked below
Real Example: $1M Loan Fixed vs SORA Over 3 Years
| Detail | Fixed 2Y at 1.6% | SORA Floating at 3.4% |
|---|---|---|
| Profile | SC buyer, $1M loan, 25-year tenure, May 2026 purchase | |
| Monthly instalment (Year 1–2) | $4,043 | $4,952 |
| Monthly saving on fixed | +$909/month | |
| Total saving over 2-year fixed period | $21,816 | |
| Lock-in penalty if selling at Month 18 | ~$14,700 (1.5% of ~$980K outstanding) | None |
| Net advantage of fixed if holding full 2yr | $21,816 ahead | |
| Scenario: SORA falls to 1.5% by Year 2 | Still locked at 1.6% marginally worse | SORA rate ~2.0–2.2% all-in starts to close gap |
| Verdict for this client | Fixed wins by ~$21,800 unless SORA falls sharply within 24 months a bet most buyers should not make in 2026 | |
Illustrative May 2026 example. Always get live quotes. Lock-in penalty applies only if you break the fixed period early.
What SORA Actually Is And Why It Matters
SORA (Singapore Overnight Rate Average) replaced SIBOR as the benchmark for Singapore floating-rate mortgages from 2024. It is published daily by MAS and reflects the actual volume-weighted average rate of overnight interbank SGD transactions.
Unlike SIBOR, which was a forward-looking estimate, SORA is backward-looking it is calculated from actual transactions. Banks use 3-month compounded SORA (the geometric mean of daily SORA over 90 days), which smooths out day-to-day volatility but still tracks global rate movements closely.
SORA does not move in isolation. It closely tracks the US Federal Funds Rate expectations via covered interest parity. When the Fed cut rates in 2024–2025, SORA fell from 3.7% (peak 2023) to approximately 2.9% by mid-2026.
Current Rate Landscape: May 2026
| Rate Type | Rate (May 2026) | Bank Spread | All-In Rate |
|---|---|---|---|
| 3M Compounded SORA | ~2.90% | +0.50–0.70% | ~3.40–3.60% |
| 1Y Compounded SORA | ~2.60% | +0.50–0.70% | ~3.10–3.30% |
| 2-Year Fixed (DBS/OCBC/UOB) | 1.45–1.65% | N/A (all-in) | 1.45–1.65% |
| 3-Year Fixed | 1.70–1.90% | N/A (all-in) | 1.70–1.90% |
| HDB Concessionary | 2.60% | N/A (pegged) | 2.60% |
Rates are indicative as at May 2026. Check directly with banks for current packages rates change monthly.
Monthly Payment Impact: $1M Loan at Different Rates
| Rate | Monthly Payment (25yr) | Monthly Payment (30yr) | vs Fixed 1.6% Saving (25yr) |
|---|---|---|---|
| Fixed 1.6% | $4,043 | $3,538 | |
| Fixed 1.8% | $4,142 | $3,641 | -$99 |
| SORA 3.4% | $4,952 | $4,422 | -$909 |
| SORA 3.6% | $5,052 | $4,523 | -$1,009 |
| HDB 2.6% | $4,539 | $3,997 | -$496 |
Assumes $1,000,000 loan, no fees. Fixed savings apply during the fixed period only.
The Rate Reset Risk With SORA
SORA packages reprice quarterly. Every 3 months, your payment changes based on the prevailing 3M SORA. For budgeting purposes, this means your mortgage is a variable expense rather than a fixed one and when SORA spiked from 0.2% in 2021 to 3.7% in 2023, monthly payments on a $1M SORA loan jumped by over $1,500/month in 18 months.
The central question is not whether SORA is cheap today it is whether you can absorb SORA rising 1–2% again during your holding period.
Decision Framework: Fixed vs SORA
| Your situation | Recommended choice | Why |
|---|---|---|
| Planning to sell within 2–3 years | Fixed (2yr) | Lock in low rate, exit before reset |
| Income is tight, buffer is thin | Fixed | Payment certainty protects household cash flow |
| Buying near peak of rate cycle | Fixed | Rates more likely to fall than rise; lock now |
| Holding 5–7+ years, strong income buffer | SORA (if rates fall further) | Rate savings over longer horizon if SORA drops |
| Rate-savvy, willing to refinance every 2yr | Fixed, refinance cycle | Best of both lock short, refinance to next best |
| HDB flat, income near ceiling | HDB loan or bank fixed | SORA not available for HDB loans |
Lock-In Periods: The Hidden Cost of Flexibility
Fixed-rate packages come with lock-in periods typically matching the fixed period (2yr fixed = 2yr lock-in). If you sell or refinance within the lock-in, the bank charges a clawback penalty, usually 1.5% of the outstanding loan amount. On a $1M loan, that is $15,000.
SORA packages often have shorter or no lock-in periods, making them technically more flexible. But given that SORA rates are currently 1.8–2.0% above fixed rates, you are paying a steep premium for that flexibility.
How to Choose: The 3-Question Framework
What to Do When Your Fixed Period Ends
When a 2-year fixed period expires, the bank automatically converts you to a floating rate typically SORA + spread. This is when most borrowers should refinance. At expiry, the clawback penalty disappears and you can move to the best available fixed rate at any bank. Legal fees for refinancing run $2,000–$3,000 but are often subsidised by the new bank.
Set a calendar reminder 4 months before your fixed period ends. By 3 months out, you should have your new IPA (In-Principle Approval) and be ready to serve notice to the current bank.
See the full refinancing playbook in Refinancing Your Singapore Mortgage in 2026.
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