As we move into 2026, many homeowners and buyers are asking the same question: should I choose a fixed or floating mortgage rate? Based on current economic indicators, bank behaviour, and historical rate cycles, the outlook suggests that both fixed and floating rates will remain relatively stable throughout 2026, before potential upward pressure emerges in 2027 and 2028.

We will break it down what borrowers should expect, and how to position their mortgage decisions strategically. 

Fairloan Advisors help clients to strategise interest rate package for clients, instead of pure comparing rates, we value-add to client’s needs. 

Interest Rate Outlook for 2026

For 2026, the difference between fixed and floating rates is expected to be marginal, making either option viable depending on loan features and flexibility.

Floating Rate Outlook (SORA)

Market expectations point towards the Singapore Overnight Rate Average (SORA) trending down towards around 1.0%, or slightly below, during 2026. When combined with typical bank spreads of 0.25 to 0.30% , the effective interest rate (EIR) for floating packages is likely to hover in the 1.25 to 1.50% range.

This keeps floating rates competitive and relatively stable for most of 2026.

Fixed Rate Outlook for 2026

For borrowers with loan sizes above $500,000, fixed-rate packages in 2026 are expected to range between 1.25 to 1.45%, depending on the bank and package structure.

There is a noticeable range because banks, particularly foreign banks, are actively competing for market share. As a result, borrowers will see meaningful differences in features rather than just headline rates.

Some banks offer:

• Fixed rates with free conversion after 12 months
  
• Pure fixed-rate packages without conversion flexibility
  
  

Comparing package features is therefore just as important as comparing rates.

Signals of a Rate Turn in 2027 and 2028

While 2026 looks stable, banks are already positioning themselves for a possible rate rebound beyond that.

Key signals include:

• Banks increasing their 3-year fixed rates by 0.05 to 0.20%
  
• Packages that were previously priced around 1.40 percent for 3-year fixed now moving to 1.45 to 1.55%
  
• Local banks like UOB and DBS are removing their HDB-exclusive 5-year fixed rate of 1.78%
  
  

These adjustments suggest that banks anticipate interest rates potentially rising again in 2027 and 2028, based on past rate cycles and longer-term economic outlooks.

What This Means for Borrowers

If You Are Choosing a Loan in the First Half of 2026

Borrowers selecting rates in the first half of 2026 have more flexibility.

Recommended options include:

• 2-year or 3-year fixed rates
  
• Floating rates with free conversion after 12 months
  
  

Since fixed and floating rates are close in pricing during 2026, flexibility and future optionality become key considerations.

If You Are Choosing a Loan in the Second Half of 2026 and Beyond

For borrowers entering the market in the second half of 2026, it may be prudent to start locking in longer fixed periods.

Recommended strategies:

• Lock in 2 to 3 years of fixed rates for private property loans
  
• Consider 5-year fixed rates for HDB loans, where available
  
  

This helps hedge against potential rate increases expected in 2027 and beyond.

Summary: Fixed vs Floating Strategy by Year

• 2026: Either fixed or floating is acceptable, as rates are broadly similar
  
• 2027 onwards: Fixed rates are generally preferred
  
  
  • 2- or 3-year fixed for private property
    
  • 5-year fixed for HDB, where suitable
    
    

The key is not just the rate, but the structure and flexibility of the package chosen.

Final Thoughts

Mortgage rate decisions should always be made with both the current rate environment and the next rate cycle in mind. While 2026 offers a window of relative stability, early signs suggest higher uncertainty in the years that follow.

Comparing banks, understanding package features, and aligning the loan structure with your holding period and risk tolerance will be critical in navigating 2026 and beyond effectively.

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