Home loan rate types: fixed, SORA and the rest

The two you will choose between

Fixed. The rate is set for the first one to three years; a few lenders fix for five. Your instalment cannot change in that time, whatever the market does. Banks price a fixed rate on where they expect rates to go, so it can sit above or below the floating packages of the day.

Floating on SORA. The rate is SORA plus a spread, the bank’s margin, which the package sets for each year. SORA, the Singapore Overnight Rate Average, is published by MAS every business day from what banks actually paid to borrow from each other overnight. A home loan uses it compounded over the past one or three months, so your rate for the coming period is known at its start. It follows the market down as readily as up; a three-month window moves less often than a one-month one. Where SORA is today.

When the fixed years end

A fixed rate is fixed only for the first years. After that, nearly every fixed package floats, usually on SORA plus a spread, and the loan runs on for decades. That later rate deserves as much attention as the fixed one: it is what you pay if you stay, and when it is above 4%, it is the rate the bank tests your loan at (TDSR, part III).

Rarer types you may still meet

Board rate. A rate the lender sets itself, often under a name of its own. It tends to follow the market, but nothing obliges it to, and how it is set is not published, so you cannot check a change against anything. A few lenders still use one, usually after a fixed period.

Fixed-deposit-pegged. A rate tied to the lender’s own fixed deposit rate, such as DBS’s FHR. You do not need to place a deposit to take one. The bank publishes the deposit rate, but it also sets it, so the peg moves when the bank decides. These are rare today, offered mainly on HDB flats.

At a glance

What to compare

Whichever type, compare packages over the years you expect to keep the loan, including the rate after any fixed years and the lock-in, the period you are tied to the bank. The type matters less than what the package costs across those years.

Gone from the market

Since 2004 we have seen lenders try most shapes of loan. Some that no longer appear:

• Fixed for ten years. Today a few lenders fix for five at most.
• Floating first, then fixed: a floating rate for the early years, switching to a fixed one later.
• Combination packages: part of the loan on a fixed rate, part floating, to spread the risk.
• SIBOR and SOR pegs. Both benchmarks were discontinued: 6-month SIBOR on 31 March 2022, SOR at the end of June 2023, and 1- and 3-month SIBOR after 31 December 2024. Loans on them were moved onto SORA. Our archive explains how SIBOR, SOR and board rates worked and how fixed-deposit rates compared with SIBOR.

None is on offer today. What lenders sell keeps changing shape, which is one more reason to compare packages over the years you will actually hold the loan, not just at the start.

SORA is published by the Monetary Authority of Singapore. Discontinuation dates from the Association of Banks in Singapore and MAS.