After two years of sharp rate movements, the market is finally settling, but not necessarily in ways that borrowers expect.

The Fed’s latest decision signals a shift toward stability rather than aggressive easing. While inflation in the US has cooled, the Federal Reserve remains cautious, expecting only one small rate cut in 2026. This sets the tone globally, and Singapore is no exception. With MAS maintaining a firm stance to support the Singapore dollar and inflation still slightly above pre-pandemic levels, the likelihood of sharp declines in borrowing costs is limited.

Yet homeowners will still experience some relief. Based on current signals from global and local markets, 3M SORA + Spread is expected to hover around 1.3% to 1.5% for most of 2026. Any further declines are likely to be mild, perhaps just 0.1% or 0.2%, unless the global economy enters a deeper slowdown. Singapore’s economic fundamentals simply do not warrant a dramatic reduction in rates: unemployment remains low at around 2%, the economy continues to grow modestly, and there is no strong reason for MAS to loosen policy aggressively.

In other words, while SORA may drift slightly downward, homeowners should not expect a return to the ultra-cheap borrowing era of 2020-2021. The environment today is very different, and the 4%+ interest rates seen between 2022 and 2023 serve as a reminder of how quickly conditions can change.

What Singapore Borrowers Should Expect in 2026

Given current forecasts, homeowners should prepare for a year of stable, moderate rates rather than steep declines. Fixed home loan packages are already pricing in this stability, with many banks offering attractive fixed rates between 1.40% and 1.5% for 2- to 3-year lock-ins as of Dec 2025. These are competitive numbers, especially when you consider that fixed packages exceeded 4% just a few years ago.

Floating packages, particularly those pegged to 3M SORA, also remain appealing. Spreads generally place effective floating rates between 1.3% and 1.5%, depending on the bank. These rates could drift slightly lower if SORA softens, but the downside potential is limited without more aggressive moves from the Fed or MAS.

Borrowers should therefore avoid assuming that “waiting longer” will lead to significantly cheaper loans. Market indicators suggest that we are already very near the bottom of this rate cycle.

Fixed, Floating, or Hybrid? Making the Right Choice in 2026

The right home loan strategy now depends less on predicting dramatic rate swings and more on understanding your own risk comfort.

Fixed rates are ideal for homeowners who value stability. At 1.4% to 1.5%, fixed packages provide predictable instalments without worrying about market volatility. For families managing tight cashflow, or first-time homeowners stepping into long-term financial commitments, the peace of mind offered by fixed rates is worth the slight premium over floating options. Given how high interest rates climbed in 2022–2023, locking in a stable rate today can protect borrowers from unexpected future spikes.

Floating rates, on the other hand, appeal to those who believe there is still some room for rates to ease, even if the decline is modest. Floating SORA packages will likely remain competitive throughout 2026. However, borrowers need to accept the possibility of mild fluctuations, especially since banks may adjust spreads or internal funding levels in response to global movements. For clients who enjoy monitoring the market and have a sufficient financial buffer, floating rates may offer slight savings over time.

There is also the DBS FHR6 option, pegged to the bank’s fixed deposit rate. Historically, FD-pegged rates tend to move more slowly, which some clients appreciate. However, borrowers should be aware that banks have full discretion to revise FD rates, making these packages not as “fixed” as they appear.

But the most interesting development for 2026 is the rise of hybrid loan structures, which combine the stability of fixed rates with the flexibility of floating rates. Many banks now allow clients to split their loan into a mix, for instance, choosing either fixed or floating for the first year and able to convert to another for free after 12 months. This gives borrowers protection against sudden spikes, while still allowing them to benefit from slight market dips.

Hybrid options are particularly appealing for anyone who is unsure about the direction of rates, or who wants to avoid “all or nothing” exposure. Given the muted outlook for major rate movements, these packages may offer the best balance of certainty and potential savings in 2026.

Should Homeowners Refinance in 2026?

For homeowners currently paying rates above 2.5%, refinancing is almost always worthwhile. Lowering your rate to around 1.3%–1.5% can translate to thousands of dollars saved each year, especially for larger loan amounts. The best time to begin reviewing your options is typically two to four months before your lock-in period ends, although some banks now offer repricing without penalties if you remain with them.

As always, the decision should be evaluated based on your loan size, tenure, financial position, and risk appetite. With rates expected to stay relatively stable in 2026, borrowers have a favourable window to lock in competitive packages before banks begin adjusting spreads again, something that commonly happens when demand surges.

Fairloan’s Recommendation for 2026 Borrowers

Looking at current economic indicators, most borrowers will benefit from either a 2- to 3-year fixed rate or a hybrid structure that offers both stability and flexibility. Floating packages remain attractive, but the potential savings may not be significant enough to justify the risk unless you are comfortable with minor fluctuations.

Borrowers who want full certainty should choose fixed. Those who enjoy optimising interest should consider floating. But for the majority, the hybrid approach offers a well-balanced solution that reflects the stable, low-volatility rate environment expected in 2026.

Ultimately, while the era of ultra-low rates is unlikely to return, 2026 is shaping up to be one of the most favourable lending environments in recent years. The key is choosing a package that matches not only the market outlook but also your personal financial comfort.

If you’d like tailored recommendations or want to compare all bank packages side-by-side, Fairloan can help you evaluate the best options based on your income, loan size, and long-term plans. 

Do check out our rates comparison table to see what the banks are offering now.