Almost every home loan package in Singapore today is built around one of two structures: a floating rate pegged to SORA, or a fixed rate locked in for a set number of years. Understanding the difference — and which suits your risk appetite — is one of the most important decisions you will make when taking or refinancing a mortgage.
What is SORA?
SORA stands for Singapore Overnight Rate Average, a benchmark published by the Monetary Authority of Singapore that reflects the actual rates at which banks borrow and lend Singapore dollars overnight. Since 2021, SORA has replaced the older SOR and SIBOR benchmarks as the standard reference rate for home loans here. Banks typically use the compounded 1-month or 3-month SORA rate, add a fixed spread on top, and that combination becomes your effective interest rate.
Because SORA moves with actual market conditions, a SORA-pegged loan will rise when interest rates rise and fall when they ease — your monthly instalment adjusts along with it, usually reviewed monthly or quarterly depending on the package.
What is a fixed rate package?
A fixed rate package locks in your interest rate for a defined period — usually two or three years — regardless of what happens to SORA or the broader rate environment during that time. After the fixed period ends, the loan typically reverts to a floating SORA-pegged rate or a bank's board rate, so "fixed" in Singapore almost always means fixed for a few years, not for the life of the loan.
The trade-off, in plain terms
A floating SORA package usually starts with a lower headline rate and gives you flexibility — some floating packages come with no lock-in at all, or a shorter lock-in than fixed packages. The downside is uncertainty: your monthly payment can rise if rates climb, which matters if your budget is tight.
A fixed rate package trades a typically slightly higher starting rate for predictability. You know exactly what you will pay each month for the fixed period, which makes budgeting easier and protects you if rates rise sharply. The downside is that if rates fall during your fixed period, you do not benefit — and you are usually locked in, so exiting early can mean a penalty.
Which one suits you?
Consider a floating SORA package if: you have some buffer in your monthly budget to absorb rate movements, you believe rates are more likely to stay flat or fall over your lock-in period, or you value the flexibility of shorter or no lock-in terms.
Consider a fixed rate package if: you are working with a tight monthly budget and need certainty, you are risk-averse by nature, or you expect rates to rise over the next few years and want to lock in current levels before they do.
There is no universally "better" choice — it depends on your cash flow, risk tolerance, and how long you plan to hold the property. Many families in Singapore choose a fixed rate for the first two to three years for peace of mind, then reassess and possibly switch to floating once the lock-in ends.
Compare live floating and fixed packages from all major banks on our rates page, or speak to an advisor if you want a recommendation based on your specific numbers.