S’pore mortgage rates rise following Fed hike: What home owners should look out for
Both fixed and floating-rate loan offerings are now higher across the major banks in the city state
[SINGAPORE] Home loan rates in Singapore are heading back up, after the US Federal Reserve recently raised interest rates for the first time in three years.
Checks by The Straits Times show that both fixed and floating-rate loan offerings are now higher across the major banks here.
At least four fixed-rate options for a S$500,000 loan on new private properties and HDB flats have crossed the 2 per cent mark, according to mortgage broker Mortgage Master’s website.
For a three-year fixed-rate package, Maybank is charging an interest rate of 2.55 per cent, while OCBC is offering 2.08 per cent.
Citi has a 2.2 per cent two-year fixed-rate package, while Standard Chartered recently raised its one- and two-year fixed-rate packages by 0.2 percentage points to 2 per cent on Thursday (Oct 1).
Maryanne Phua, head of home loans at OCBC, said the bank adjusted its home loan rates during the week of Sep 21, following a 0.25 percentage point interest rate hike in the US on Sep 17.
“We regularly review our home loan packages and adjust them according to market conditions, including interest rate movements,” she added.
Phua further noted that markets are expecting higher interest rates, pointing to the rise in the Singapore dollar Overnight Indexed Swap rates across the one- to three-year tenors.
Banks use these swap rates – which reflect their own wholesale market borrowing costs – plus a profit margin to set the one- to three-year fixed home loan rates they charge customers.
The swap rates rose by nearly 0.3 percentage points in September, Phua noted, adding that OCBC has thus adjusted its fixed home loan rates by around 0.2 percentage points.
As for UOB, it “adjusted the rates of selected home loan packages” ahead of the Fed’s September meeting, following a review in August.
Jacquelyn Tan, head of group personal financial services at UOB, said the adjustments ensure its packages “reflect prevailing market conditions”.
Chelsea Ling, head of deposits and secured lending at DBS Singapore’s consumer banking group, told The Straits Times that the bank is reviewing its fixed-rate home loan packages, attributing the adjustments to what it calls “evolving market conditions”.
Floating rates also going up
As banks adjust their fixed-rate options, floating interest rates are also rising.
The Singapore Overnight Rate Average (SORA) is the primary floating-rate benchmark for Singapore dollar loans, including floating-rate home and car loans.
Joanne Goh, senior investment strategist at DBS Bank, said that following the recent US rate hike, markets are expecting one more increase in 2026 and another by the first quarter of 2027.
This will raise US interest rates by another 0.5 percentage points from current levels, to 4.25 per cent to 4.5 per cent.
However, a 0.5 percentage point hike need not necessarily translate into an equivalent 0.5 percentage point increase in SORA rates.
Goh noted that unlike the US, Singapore controls inflation by managing the value of the Singapore dollar rather than by setting interest rates.
She added that because of this “managed currency policy” and the “flush liquidity” in the banking system, Singapore’s interest rates and bond yields are unlikely to climb as high as those in the US.
The one-month and three-month compounded SORA rates are hovering around the 1.2 per cent levels, after bottoming out at around 1 per cent in the second quarter of 2026.
As SORA rises, floating-rate mortgages have also increased, even though the bank’s own mark-up – which is added to the SORA rate – remains unchanged.
The mark-up is a fixed percentage that banks charge to cover their costs and profits.
Fixed or floating
With most floating-rate packages hovering around 1.5 to 1.8 per cent, fixed-rate packages are slightly more expensive.
Clive Chng, associate director of Redbrick Mortgage Advisory, pointed out that when home owners opt for a fixed-rate package, they are essentially buying insurance against unexpected rate increases.
He added that the cost of this insurance is still affordable, given the narrow rate gap between fixed- and floating-rate packages today.
Mortgage Master chief executive David Baey concurred that floating-rate mortgages are “not going to be great for the next six months to a year”.
“The Iran war was supposed to end very fast, but it has not ended. As a result, oil prices have shot up,” he said.
Higher oil prices push up inflation, and the Fed will have to raise rates to counter that – which is bad news for borrowers on floating rates.
Baey added: “Floating-rate is going to increase in the next one year before it decreases again.”
He advised home owners to look for shorter-term, one-year fixed packages instead of longer-term options of two to three years.
He emphasised that the world is not experiencing inflation because the global economy is doing well and people are spending more.
Rather, it is because the cost of living has increased, which he believes could trigger a recession.
“When there is a recession, interest rates are going to go down. We should thus leave our options open so that we are not locked into a long-term fixed rate,” Baey noted.
Checks by The Straits Times found that most banks have removed their one-year fixed packages, except for OCBC and RHB.
While both banks let home owners switch to a cheaper package after a year, they must commit to a two-year lock-in period and cannot transfer the loan to a competitor.
Standard Chartered also has a one-year fixed-rate option, which switches to a floating rate – pegged to the one-month SORA plus 0.4 per cent – in its second year.
The package carries a strict two-year lock-in period, meaning home owners must stick with the second year’s floating rate.
Ultimately, the choice comes down to individual preference, circumstances and risk appetite.
When his five-year fixed-rate package ended, private property owner Tay preferred the continued certainty of a fixed rate.
He refinanced his home loan with OCBC in June 2026 by taking a two-year fixed-rate mortgage at 1.4 per cent, before the latest round of rate rises.
“I’ll take fixed (rates) for peace of mind now due to the war and uncertainties in the Middle East, which may cause inflation and prompt the Fed to raise rates,” he said.
As to why he chose the two-year option over the three-year one, Tay explained that he may want to buy another property. A shorter two-year lock-in period gives him more flexibility should he want to repay his current loan.
Options for HDB home owners
HDB home owners have the additional option of taking a loan from the Housing Board at the concessionary interest rate, which is pegged at 0.1 percentage point above the Central Provident Fund (CPF) Ordinary Account (OA) rate.
The concessionary HDB loan rate has stayed at 2.6 per cent for the past two decades.
Banks also offer exclusive loan deals for HDB flat owners. For instance, OCBC has a five-year fixed package at 2.28 per cent, while DBS offers a three-year fixed-rate option at 2.08 per cent.
Of course, HDB owners can also choose from other standard loan options.
DBS also has an HDB loan offering, which is guaranteed to stay below the OA rate for the entire duration of the loan. This means the rates of this DBS package will always sit below the 2.6 per cent HDB concessionary rate.
The rates are clearly laid out – 1.78 per cent in the first three years (0.72 percentage points below OA), before stepping up to 2.2 per cent in the fourth and fifth years (0.3 percentage points below OA), and 2.4 per cent from year six onwards (0.1 percentage point below OA).
Ling from DBS noted that this rate structure provides borrowers with clarity about their monthly repayments.
Beyond the rates, Chng said the DBS package draws on emotional familiarity.
“I think it’s really playing not just with the rates but playing with what people are familiar with.”
He noted that people have a positive connection to the OA rate, adding that most home owners are happy paying any mortgage rate that is below the OA and the HDB concessionary loan benchmark.
However, Chng pointed out that when SORA drops, the bank’s cost of funds actually becomes cheaper.
If customers stick with the DBS HDB loan package because they are happy paying the OA rate minus a spread, they will miss out on deeper market savings and the bank “earns the difference”.
“I really think it’s quite smart,” he said.
Look beyond the advertised interest rate
Interest rate movements are top of mind for many home owners, and some may go with the lowest rates they can find among the plethora of loan options.
Tan from UOB said the “right mortgage plan is about more than just the headline rate”.
Home owners should focus on what matters: finding a loan that is affordable, offers flexible repricing options and fits their long-term financial goals, she added.
Ling from DBS concurred that a home owner should not choose a mortgage based on the headline rate alone as everyone has different financial needs.
Borrowers may want to look at how their interest rate can change over the duration of the loan, as well as factors such as the lock-in period and fees for switching packages.
She added that home owners who are looking to refinance early may want to calculate whether the potential interest savings will outweigh the fees and exit penalties imposed by their current bank.
At the end of the day, there is “no blanket answer”, Redbrick’s Chng said.
“If you dive deeper into a person’s circumstances, that is where you start uncovering a lot more requirements. They may sometimes have to go with a high interest rate but a package that comes with a lot more flexibility.” THE STRAITS TIMES
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