Singapore homeowners have some good news in 2026. After mortgage rates climbed sharply and reached around 4% at their peak in late 2023, interest rates have fallen significantly. Some banks are now offering home loan packages at rates of approximately 1.4%.
If you currently have a home loan with an interest rate above 1.5%, this could be a good time to explore refinancing or repricing options. However, a lower interest rate alone should not determine whether you switch your mortgage. Your lock-in period, refinancing costs and future property plans are equally important.
What Is Home Loan Refinancing?
Refinancing means moving your existing home loan from one bank to another.
For example, if you currently have a mortgage with a relatively high interest rate, you may switch your outstanding loan to another bank offering a cheaper package.
Banks often provide attractive interest rates to new customers. Many home loan packages offer low rates during the first few years before increasing the interest rate later. This means homeowners who remain with the same package for too long could eventually end up paying significantly more than the current market rate.
By refinancing, you may be able to reduce your monthly repayments and save money on interest over the long term.
Refinancing vs Repricing
There is an important difference between refinancing and repricing.
Refinancing means moving your loan to another bank.
Repricing means switching to a different loan package offered by your existing bank.
Repricing is usually simpler because you do not need to move your loan to a new financial institution. However, your existing bank may not always provide the most competitive package.
Before deciding, it is worth comparing both options.
Why Are Mortgage Rates Falling?
Many floating-rate home loans in Singapore are linked to the Singapore Overnight Rate Average, or SORA.
The most commonly used benchmarks are 1-month compounded SORA and 3-month compounded SORA. These rates influence the interest charged on many floating-rate mortgages.
Since late 2023, SORA has declined steadily. According to the figures cited in this article, 3-month compounded SORA fell below 3% in January 2025 and below 2% in July 2025. It reached approximately 1.02% in April 2026 and stood at around 1.13% in August 2026.
A typical floating-rate home loan is structured as:
SORA + Bank Spread
For example, if SORA is 1.13% and a bank charges a 0.25% spread, the total mortgage interest rate would be approximately 1.38%.
SORA is the same regardless of which bank provides your home loan. The major difference between loan packages is often the spread charged by the bank.
That is why homeowners should compare the complete loan package rather than focusing only on the current SORA rate.
Fixed Rate or Floating Rate?
When refinancing, homeowners generally choose between fixed-rate and floating-rate packages.
A fixed-rate mortgage provides the same interest rate for a specific period. Your monthly repayments remain predictable during that period, even if market interest rates change.
A floating-rate mortgage moves according to changes in its underlying benchmark, such as 1-month or 3-month SORA.
In a falling interest-rate environment, floating-rate packages can be attractive because borrowers may benefit if rates continue to decline. However, floating rates can also rise in the future.
Your choice should depend on whether you prefer stable repayments or are comfortable with interest rate fluctuations.
Should You Wait for Rates to Fall Further?
Waiting for mortgage rates to reach their absolute lowest point may sound like a good strategy, but it is difficult to predict when interest rates will stop falling.
There is another factor to consider: the bank spread.
Even if SORA falls further, banks may increase their spreads. This could reduce the benefit of waiting for a lower benchmark rate.
Refinancing also takes time. The process can take approximately eight to thirteen weeks to complete.
For homeowners approaching the end of their lock-in period, it is sensible to start comparing loan packages around three to six months before the lock-in ends.
Check Your Lock-In Period and Costs
Before refinancing, carefully review your current loan agreement.
If your mortgage is still within its lock-in period, you could face penalties for switching banks early. These charges may significantly reduce the savings you expect to achieve.
You should also consider other costs, including legal fees and valuation fees.
A lower interest rate is only worthwhile if the total savings exceed the costs of refinancing.
When Should You Consider Refinancing?
Refinancing may be worth considering if:
- Your current mortgage rate is significantly higher than current market rates.
- Your lock-in period is ending soon.
- You plan to keep your property for several more years.
- Your potential interest savings are greater than the costs of switching.
However, refinancing may not be the right choice if you plan to sell your property soon or have a small remaining loan amount.
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