If you are exploring mortgage options in Singapore in 2025, you are likely coming across the term SORA, the Singapore Overnight Rate Average. This benchmark has become the backbone of most floating-rate housing loans in Singapore, replacing legacy indices like SIBOR and SOR.

But what exactly is SORA, how does it work in practice, and is it a smarter choice today compared to fixed-rate packages?

The answer is not one-size-fits-all. While SORA loans offer transparency and may benefit borrowers as interest rates fall, fixed-rate loans provide certainty and peace of mind. We will unpack SORA in detail, look at the latest market data, and compare floating versus fixed packages to help you decide which loan structure fits your financial goals.

What Exactly Is SORA?

SORA, or the Singapore Overnight Rate Average, reflects the volume-weighted average of actual overnight interbank SGD borrowing transactions. Every Singapore business day, the Monetary Authority of Singapore (MAS) compiles data from trades conducted between 8:00 AM and 6:15 PM and publishes the rate.

This method makes SORA a transparent and market-driven benchmark. Unlike legacy benchmarks such as SIBOR (Singapore Interbank Offered Rate, based on bank estimates of borrowing costs) and SOR (Swap Offer Rate, linked to USD/SGD swaps), SORA is derived from actual transactions. The shift reduces subjectivity and the risk of manipulation, aligning Singapore with international moves towards transaction-based benchmarks, such as SOFR in the United States and SONIA in the UK.

Think of it this way: SIBOR was like forecasting tomorrow’s rainfall based on experts’ predictions, while SORA is like recording how much rain actually fell today. It is grounded in reality rather than speculation, making it a more reliable reflection of borrowing conditions.

How Is SORA Used in Home Loans?

Banks in Singapore offer a wide range of floating-rate home loans pegged to compounded SORA, usually calculated over 1-month or 3-month periods. This means your interest rate is based on the average daily SORA values across the past 30 or 90 days, plus a bank-determined spread.

For example, if the 3-month compounded SORA averages 1.65%, and the bank’s spread is +0.30%, your effective loan rate would be 1.95%. 

Compounded SORA smooths out daily fluctuations, giving borrowers more predictability than a single-day spot rate. A 1M SORA loan adjusts monthly, making it more volatile but quicker to reflect falling rates. A 3M SORA loan adjusts quarterly, offering more stability in repayment amounts.

This flexibility allows borrowers to select packages that suit their tolerance for rate changes. Many banks also offer hybrid options, or enable conversions between floating and fixed packages after a lock-in period, adding another layer of choice.

Transparency and Stability

One of SORA’s biggest advantages is its data-driven transparency. Because it reflects actual interbank trades, it avoids the credibility issues that plagued SIBOR and SOR. Borrowers can verify the benchmark daily on MAS’ website, ensuring full visibility into how their interest rate is calculated.

SORA loans also tend to move in tandem with broader economic trends. During 2022–2023, when inflation was high and central banks hiked rates aggressively, SORA spiked above 3%, leading to painful monthly instalments for floating-rate borrowers. But in 2025, SORA has cooled significantly. As of August 2025, the 3M SORA stands at around 1.65%, reflecting a major drop compared to the highs of the previous rate cycle.

Banks typically add a spread of 0.3% to 0.6%, depending on tenure and loan size. This means competitive floating packages today hover between 1.9% and 2.1%, still slightly higher than the lowest fixed packages, but with potential to fall further if SORA declines.

Rate Outlook for the Remaining 2025

The outlook for interest rates is a crucial factor in choosing between SORA and fixed loans. Global markets expect the US Federal Reserve to begin cutting rates more aggressively in late 2025, with MAS likely to maintain an accommodative stance to support growth. As a result, economists project SORA to stay below 2% for the near term, potentially extending Singapore’s return to a low-rate environment.

For context, during the peak of 2023, 3M SORA surged above 3.5%, driving many homeowners to refinance into fixed-rate packages for protection. Today, however, the climate is different: fixed rates are being priced competitively between 1.70% and 2.00%, while floating rates based on SORA are hovering around 1.95% – 2.05%.

This creates a trade-off: fixed rates are currently cheaper upfront, but if SORA continues to fall, floating loans could outperform fixed packages in the longer term.

Should You Switch to a SORA Loan in 2025?

The decision between SORA and fixed loans depends on your financial goals and risk appetite. Let’s consider three borrower profiles:

• Young Couple Buying Their First Flat: Budgeting certainty is critical, especially in the early years of marriage when expenses are high. A fixed rate of 1.7% – 1.9% ensures predictable monthly repayments, which may outweigh the potential savings of a floating SORA loan.

   

• Investor or Upgrader: Someone buying a second property, or planning to refinance within a few years, may prefer a SORA loan. With rates trending downward, a floating loan at 1.95% could translate to long-term savings, especially if sold or refinanced before SORA rises again.

   

• Refinancer Paying a High-Rate Loan: If you are stuck in a package above 3% from the previous cycle, refinancing into a new SORA loan now could cut your interest costs almost in half. The savings could amount to tens of thousands over the loan tenure.

   

Conclusion: Which Loan Is Better in 2025?

SORA has emerged as a transparent, stable, and fair benchmark that reflects actual market conditions. In 2025’s improving interest rate environment, it is becoming increasingly attractive, particularly for borrowers who believe rates will fall further. At the same time, fixed-rate packages remain very competitive, often slightly cheaper than floating loans upfront, while offering the security of stable repayments.

Ultimately, the “better” choice depends on your priorities. For stability and predictability, fixed rates at 1.7 – 2.0% are hard to beat. For flexibility and potential long-term savings, SORA loans at 1.9% – 2.1% could prove more rewarding if the low-rate cycle continues.

Before deciding, it’s wise to compare packages across banks, account for lock-in clauses, and align the loan structure with your financial plans. Even a slight difference, say between 1.70% fixed and 1.95% floating, can add up to tens of thousands in savings across a 25-year loan.

FAQs

1.What is the difference between 1M SORA and 3M SORA loans?

1M SORA loans are pegged to the average daily rate of the past 30 days and reset monthly. They are more responsive to falling rates but can also rise faster. 3M SORA loans are based on the past 90 days and reset quarterly, offering more repayment stability.

2.Can I refinance from a fixed-rate loan to a SORA loan?
Yes, refinancing is possible once you pass your lock-in period. Many homeowners who locked into fixed rates above 3% in 2022–2023 are now refinancing into cheaper SORA packages.

3.Are SORA loans riskier than fixed loans?

They carry more uncertainty because monthly instalments fluctuate with market rates. However, with SORA trending downward in 2025, many borrowers may benefit from lower payments compared to fixed packages.

4.Why did Singapore replace SIBOR with SORA?

SIBOR was based on bank estimates and SOR on foreign exchange swaps, making both prone to volatility and manipulation. SORA is grounded in actual SGD transactions, providing transparency and integrity.