SORA vs Fixed Rate Home Loans in Singapore (Sept 2025): Which is Better?

Singapore’s mortgage market is shifting again. With the daily SORA dipping below 1% in September 2025, homeowners and investors alike are asking the same question: Should I stick with a fixed rate for stability, or switch to a SORA-pegged floating package to capture savings?

The decision is not straightforward. While fixed rates are currently at some of their lowest levels in recent years, SORA packages look increasingly attractive, especially for borrowers comfortable with some volatility. Beyond just headline rates, loan features such as penalty waivers, partial prepayment options, and free conversion clauses can significantly impact the total cost and flexibility of your mortgage.

This article will compare the latest fixed and SORA mortgage packages in Singapore, explain the pros and cons, and highlight the features that matter most to buyers in different loan brackets.

Current Mortgage Rates in Singapore (as of Sept 2025)

Based on the latest data from major banks:

• Fixed Rate Packages

  • Loans above $2 million → 1.65%

  • Around $1 million → 1.70%

  • Between $500,000 and $1 million → 1.75%

• SORA-Based Packages

  • 1-month or 3-month SORA + spread of 0.30% to 0.50%, depending on loan size.

  • With 1m/3m SORA currently below around 1.3-1.5%, all-in rates are hovering around 1.6%–2.0%.

On paper, floating SORA loans are cheaper, but risk and features need to be considered before making a decision.

Fixed Rate Mortgages: Stability at Historic Lows

Advantages of Fixed Rates

1. Certainty of Repayments
   Fixed rates lock in your instalments for 2–3 years (sometimes up to 5). This makes budgeting easy and shields you from sudden rate spikes.

2. Peace of Mind
   Especially for families with tight cash flows, fixed rates reduce anxiety about fluctuating payments.

3. Attractive Pricing in 2025
   With fixed packages as low as 1.65% for large loans, borrowers are enjoying some of the most competitive fixed rates in years.

Drawbacks of Fixed Rates

1. Slightly Higher Than SORA
   Fixed packages (1.65% – 1.75%) are currently 5 to 10 basis points higher than SORA-based loans. Over time, this premium may add up.

2. Lock-In Periods
   Most fixed loans come with a 2-3 year lock-in, meaning you pay a penalty if you refinance or redeem your loan early, unless a waiver applies.

3. Less Flexible
   Once locked in, you can’t benefit immediately if interest rates drop further.

SORA-Pegged Mortgages: Riding the Market

Advantages of SORA Loans

1. Lowest All-In Cost
   With Daily SORA falling below 1% on some days, and spreads of 0.30–0.50%, many borrowers are hoping that 1month or 3month SORA can reach below 1% eventually paying 1.3–1.5%,  significantly lower than fixed rates today.

2. Transparent Benchmark
   SORA is a published rate based on actual transactions, not bank-managed board rates, making it more transparent and predictable in movement.

3. Potential for Further Savings
   If global interest rates continue easing, SORA-linked borrowers benefit directly.

Drawbacks of SORA Loans

1. Volatility
   Monthly instalments may fluctuate. If SORA rises unexpectedly, repayments can increase quickly.

2. Uncertainty for Budgeting
   Families with tighter cash flows may find it stressful to manage changing instalments.

3. Short Reset Periods
   1-month SORA resets more frequently than 3-month SORA, creating more variability.

Key Mortgage Features You Shouldn’t Ignore

Beyond just interest rates, the terms and features of your loan package can make a big difference in real cost and flexibility. Here are the most important features in Sept 2025:

1. Waiver of Penalty Due to Sale

Most banks impose 1.5% penalties if you redeem your loan early during the lock-in period. However, some offer a waiver if you sell your property. This is crucial for upgraders or investors who may not hold the property long term.

2. Partial Prepayment Options

Some banks allow 10% partial prepayment per year without penalty, sometimes up to 30%. This feature helps reduce interest costs faster if you receive bonuses, windfalls, or excess cash flow.

3. Free Conversion After 1 Year

Some banks allow a free conversion after the first year, giving borrowers the flexibility to switch packages if market conditions change. This is especially valuable for those “sitting on the fence”, borrowers who want data on rate trends before making a long-term commitment.

4. Repricing and Refinancing Flexibility

Look out for packages that make it easy to reprice internally with your existing bank, or refinance externally at low cost once the lock-in ends.

Which Package Is Better in Sept 2025?

For Large Loans ($2 million and above)

• Fixed Rate at 1.65% is highly competitive. The small difference from SORA may be worth paying for certainty, since absolute savings from rate drops are smaller relative to the risk of higher volatility on large loans.

For Mid-Sized Loans ($1 million)

• Borrowers face 1.70% fixed vs ~1.6–1.7% SORA all-in. If you can tolerate some fluctuation, SORA offers meaningful savings here. However, a fixed loan may still be appealing if you expect to hold the property long term and value stability.

For Smaller Loans ($500k–$1 million)

• Fixed at 1.75% vs SORA around 1.8–2.00%. The gap is wider here, so borrowers with financial buffer may lean towards fixed. For HDB owners, banks are offering 3years or 5years fixed package again.

Practical Scenarios

1. Upgrader Selling Within 3 Years
   A SORA package with penalty waiver upon sale may be best — lower rates, plus flexibility if you sell early.

2. Investor Holding for Rental Yield
   Likely to prefer SORA to maximise short-term cashflow, while retaining conversion flexibility later.

3. Family with Young Children
   Stability matters more; fixed rates provide predictable cashflow and peace of mind.

Our Expert Insights

The difference between fixed and SORA is no longer just about rates. With features like penalty waivers, partial prepayment, and free conversion after 1 year, borrowers can craft strategies that balance cost savings with flexibility.

At Fairloan Mortgage Advisory, we see a growing trend:

• Borrowers taking SORA packages with free conversion features, ride today’s low rates, but switch to fixed later if volatility returns.

• Larger loan borrowers still prefer fixed packages at 1.65%, a historically low rate that buys stability at a minimal premium.

Conclusion

As of September 2025, both SORA and fixed-rate mortgages in Singapore are highly competitive, with rates at multi-year lows. SORA loans currently offer cheaper monthly instalments, while fixed loans provide security against unexpected rate movements.

The best choice depends on your loan size, financial buffer, risk tolerance, and property plans. Importantly, don’t just compare headline rates; evaluate loan features like penalty waivers, prepayment options, and free conversion clauses, which can save you thousands over the loan tenure.

Fairloan Mortgage Advisory helps clients compare packages across all banks, analyse true costs, and choose the best loan strategy. Whether you prefer the stability of fixed or the flexibility of SORA, our advisors ensure your mortgage is structured to suit your long-term goals.