By The Address desk · Last verified 4 October 2026
A Singapore home loan comes in two main shapes. A fixed-rate loan keeps your interest rate unchanged for an agreed number of years, then usually reverts to a floating rate. A floating-rate loan moves with a benchmark, today most often compounded SORA, the Singapore Overnight Rate Average published by the Monetary Authority of Singapore (MAS), plus a fixed spread set by the bank. Most bank packages also carry a lock-in period: repay the loan or refinance during it and you pay a penalty. The HDB concessionary loan works differently: its rate is pegged at 0.1 percentage point above the CPF Ordinary Account rate and reviewed quarterly, which means 2.6% a year as of October 2026, with the OA rate at 2.5%.
Choosing a loan is less about guessing interest rates and more about knowing how much change your budget can absorb. Here is how each part works.
Quick facts
- Fixed: a set rate for an agreed period, then usually a floating rate.
- Floating: benchmark plus spread; the spread is fixed, the benchmark moves.
- SORA: computed by MAS each business day as the volume-weighted average of eligible overnight interbank trades.
- Compounded SORA: MAS publishes 1-month, 3-month and 6-month versions daily; bank loans commonly reference one of these.
- Lock-in: a period in which full repayment or refinancing triggers a penalty set out in your letter of offer.
- HDB loan: 0.1 percentage point above the CPF OA rate, reviewed quarterly; 2.6% as of October 2026.
Fixed or floating: the trade-off
| Feature | Fixed rate | Floating (SORA-pegged) |
|---|---|---|
| Monthly instalment | Stays the same during the fixed period | Changes as SORA moves |
| When rates rise | Protected until the fixed period ends | Instalment goes up |
| When rates fall | No benefit until the fixed period ends | Instalment goes down |
| Transparency | Rate set in the offer | Benchmark is public; spread set in the offer |
| Best for | Tight budgets that need certainty | Buffers that can absorb swings |
Check what happens after a fixed period ends. Many packages switch to a floating rate or a bank’s board rate, and that later rate is part of the true cost.
How SORA sets a floating rate
MAS calculates SORA from actual overnight borrowing between banks in Singapore dollars, taking trades between 8am and 6.15pm each business day and publishing the rate at 9am the next business day. Because a single night’s rate is jumpy, loans use compounded SORA over one, three or six months, which smooths it out. Your loan rate is then compounded SORA + spread. If your package says 3-month compounded SORA + 0.3%, only the SORA part moves; the 0.3% stays for the period stated in your offer.
Worked example (illustrative rates): a $500,000 loan over 25 years at 3.0% a year costs about $2,371 a month. If the benchmark rises half a point and your rate becomes 3.5%, the instalment rises to about $2,503, roughly $132 more each month. At the HDB rate of 2.6%, the same loan would be about $2,268. Test your budget against a rise like this before choosing floating.
How lock-in periods work
- Find the lock-in length in the letter of offer, and the date it counts from.
- Read the penalty: usually a percentage of the amount repaid or refinanced during the lock-in.
- Check for clawbacks: some packages recover legal or valuation subsidies if you redeem early.
- Note partial prepayment rules: some loans allow small prepayments without penalty, others do not.
- Mark the end date: once the lock-in ends, you are free to reprice with your bank or refinance elsewhere without that penalty.
Lock-ins matter most if you might sell, because selling means repaying the whole loan; if that happens inside the lock-in, the penalty can apply to the full outstanding amount. Match the lock-in to how long you expect to keep the home. The HDB loan works differently: HDB encourages borrowers to make partial or early repayments to save interest, and its loan page describes no lock-in. Before refinancing an HDB loan to a bank, check HDB’s current rules on switching, since the decision may not be reversible.
The WahLiao Verdict
Pick the loan whose worst month you can still pay comfortably. If a half-point rise would hurt, the certainty of a fixed rate is worth paying for; if you have a buffer, a SORA-pegged loan is transparent and fair. Whichever you choose, read three lines in the offer before signing: the spread or fixed rate, the rate after any fixed period, and the lock-in penalty.
Questions people ask
What is the difference between SORA and compounded SORA?
SORA is a one-night rate published daily by MAS. Compounded SORA averages it over one, three or six months, which is what most home loans use.
What is the HDB loan rate now?
2.6% a year as of October 2026: 0.1 percentage point above the CPF Ordinary Account rate of 2.5%, which applies from 1 October to 31 December 2026.
Can I leave a loan during the lock-in?
Yes, but you pay the penalty stated in your letter of offer, and possibly a clawback of subsidies. After the lock-in ends, you can reprice or refinance freely.
Is a fixed rate always safer?
It is safer for budgeting during the fixed period, not necessarily cheaper. After the period ends, the rate usually changes to a floating one.
Sources: MAS, how SORA is calculated and compounded SORA tenors; HDB, HDB housing loan interest rate; CPF Board, CPF Ordinary Account interest rate. Lock-in and penalty terms vary by bank and are set in each letter of offer. The Address explains; it does not advise.
Read next: HDB Loan or Bank Loan: LTV, MSR and TDSR · HDB Valuation and Cash Over Valuation · Your Credit Score in Singapore · Back to The Address
For what’s worth it this week, with the bill shown, read The WahLiao Week.
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