As Singapore enters 2026, one of the biggest questions for homeowners is whether to choose a fixed or floating home loan rate. After the volatile interest rate cycle from 2020 to 2023, when mortgage rates soared above 4%,  many borrowers are understandably cautious. But with the US Federal Reserve implementing another rate cut in December 2025, expectations for the year ahead have shifted.

 

While most analysts forecast only one more Fed cut in 2026, market conditions still point to a period of relative stability. In Singapore, both fixed and floating mortgage packages have settled into the 1.3% to 1.5% range, marking one of the lowest levels seen in recent years.

 

The question then becomes: Should you lock in a fixed rate, or take your chances with a floating SORA package?

 

This article breaks down the latest 2026 interest rate outlook, compares fixed and floating packages, and offers practical recommendations based on your risk profile and financial goals.

 

2026 Rate Outlook: What We Know So Far

 

1. The Fed’s final 2025 rate cut signals stability, not a steep decline

The Fed delivered another rate cut in December 2025, reducing pressure on global borrowing costs. However, unlike the aggressive cuts seen previously, this was widely expected to be the last or second-last cut in this cycle.

 

For 2026, most economists foresee:

• One more rate cut at most
  
• Flattening inflation
  
• Slower economic growth
  
• Slight unemployment uptick in the US and regionally
  

 

This suggests a stable interest rate environment, not a plunging one.

 

2. In Singapore, SORA is expected to hover around 1.1- 1.3%

SORA has already moderated from its 2022–2023 highs, and most banks now price floating packages with:

• 3M SORA + a spread (typically around 0.50%)
  
  

Given current expectations, it is unlikely for SORA to fall sharply in 2026, but also unlikely to spike.

 

This creates a unique scenario, floating rates are attractive but not substantially cheaper than fixed rates, unlike previous cycles.

 

3. Bank competition has pushed fixed rates lower than expected

DBS, UOB and OCBC are offering HDB exclusive rates:

• 3-year fixed: 1.50%–1.55%
  
• 5-year fixed: 1.78%
  
  

These are remarkably low, especially compared to HDB’s fixed 2.6%.

 

Historically, when fixed rates fall close to floating rates, it becomes harder to justify choosing floating, unless you expect further cuts.

Fixed vs Floating Rates in 2026: What’s the Real Difference?

 

Fixed Rates (1.35%–1.78%)

Advantages:

• Absolute certainty for 2–5 years
  
• No exposure to SORA movement
  
• Helpful for budgeting and long-term planning
  
• Attractive pricing compared to historical averages
  
• Good hedge if global conditions turn volatile
  
  

Disadvantages:

• If SORA drops further, you won’t benefit
  
• Lock-in penalty if you sell early
  
• May be slightly higher than the initial floating rate
  
  

Best for:

• Risk-averse homeowners
  
• Families needing stable monthly instalments
  
• Buyers with tight cashflow
  
• Borrowers who remember the 4%+ spike and want predictability
  
• Newlyweds or first-time BTO buyers planning long-term
  
  

 

Floating Rates (SORA 3M ~1.3%)

Floating packages today are often priced at 1M/3M SORA + 0.50% spread

This puts total rates close to 1.3% to 1.6%, depending on the bank.

Advantages:

• Potential savings if SORA dips slightly
  
• Historically lower rates over the long run
  
• Can convert to fixed later (many banks offer free conversion after 12 months)
  
• Good for borrowers willing to take mild fluctuations
  
  

Disadvantages:

• Rates reset every 1/3 months
  
• Harder to predict monthly payments
  
• If global volatility returns, SORA may rise again
  
• Not suitable for tight budgets
  
  

Best for:

• Borrowers are comfortable with mild rate movements
  
• Investors with strong liquidity
  
• Homeowners planning to refinance in 12–18 months
  
• Those expecting slight downward movements in SORA
  
  

Hybrid Home Loan Structures: The Best of Both?

Many borrowers overlook a useful 2026 option,  the hybrid loan, where:

• Part of the loan is fixed
  
• Part of the loan is floating
  
  

This hedges both scenarios:
You enjoy partial stability, while maintaining upside potential.

Useful for:

• Homeowners with medium risk appetite
  
• Investors who want smoothing of monthly instalments
  
• Buyers unsure whether rates will move
  
  

Banks also offer free conversion after 12 months, allowing you to switch strategies if market conditions change.

 

2026 Market Insights: What Will Actually Happen?

 

Rates are unlikely to drop significantly

Even if the Fed cuts once in late 2026, Singapore banks have already priced in much of the expected easing.

This means the best-case drop might be in the range of 0.10% to 0.20%

 

Not enough to justify taking a significant risk unless your loan size is extremely large.

 

Rates are also unlikely to surge like 2022–2023

Inflation is cooling, supply chains are stable, and economic growth is moderate.

No major event is currently expected to push SORA above 2% in the short term.

 

This stability supports both fixed and floating decisions.

 

Loan pricing competition will continue

Banks aggressively rolled out promotional packages in Q4 2025. This trend is expected to continue into early 2026 as:

• Housing demand stays strong
  
• Resale volumes remain healthy
  
• BTO collections continue
  
• Banks fight for market share
  
  

This benefits homeowners, especially those refinancing.

 

So, Should You Choose Fixed or Floating in 2026? (Fairloan’s Recommendation)

Your decision depends heavily on your risk appetite and financial situation.

Here’s a practical breakdown:

 

Choose Fixed Rate in 2026 if you…

• Want peace of mind and stable instalments
  
• Have a young family
  
• Are stretching your budget
  
• Are buying a first home
  
• Remember the pain of 3–4% rates
  
• Want to secure historically low fixed rates
  
• Prefer long-term planning
  
  

2026 Recommended Fixed Packages:

• 3-year fixed: 1.40%–1.55%
  
• 5-year fixed (HDB exclusive): 1.78% (DBS/UOB/OCBC)
  
  

These are extremely good value.

 

Choose Floating Rate in 2026 if you…

• Expect SORA to remain stable or dip slightly
  
• Want short-term savings
  
• Are comfortable with minor fluctuations
  
• Plan to refinance within 1 to 2 years
  
• Want to bet on slow, gradual Fed cuts
  
  

2026 Recommended Floating Packages:

• 1M/3M SORA + 0.40%–0.60%
  
• DBS FHR6 (if you prefer FD-pegged stability)
  
  

Floating is not dramatically cheaper than fixed, but still an option for strategic borrowers.

 

A Balanced Approach: Start Floating, Convert Later

Many clients choose:

• Floating for first 12 months (enjoy short-term savings)
  
• Convert to fixed after a year (if market stabilises or rises)
  
  

Some banks offer free conversion, which adds flexibility. 

But do note that some banks may offer higher than market rate for conversion. 

 

Fairloan’s Final Verdict

For 2026, the safest and most practical choice for most homeowners is:

2–3 year fixed rate between 1.35% and 1.55%.

Why?

• It locks in historically low rates
  
• It removes uncertainty
  
• Floating rates offer only minor additional savings
  
• The risk-reward ratio favours stability
  
• 2026 is predicted to be a “flat” year
  
• Fixed packages are unusually competitive right now
  
  

Risk-takers can still choose floating, but for the average homeowner, fixed rate might be the better option. 

 

Need a personalised recommendation?

Every borrower’s situation is different. Income stability, loan size, property type, refinancing history and long-term plans matter more than general predictions.

 

Fairloan helps you compare the latest packages across 16 Banks in Singapore. We have over 300 different packages from all banks. 

 

Check out the latest rates here