How Banks Determine Your Mortgage Interest Rate Rates and Fees Explained
Banks in Singapore determine your mortgage interest rate primarily through a combination of benchmark rates like SORA, your personal credit risk premium, the bank's profit spread, and associated fees.[1][2]
This cluster article breaks down how banks set rates, focusing on actionable insights for first-time buyers and refinancers. It supports our pillar guide on Singapore Mortgage Rates Complete Guide 2026, providing tactical advice to secure the best deal via Homejourney's trusted platform.
Key Factors in Interest Rate Determination
Mortgage rate factors include the base benchmark, your borrower profile, and bank-specific margins. Most loans are floating, pegged to SORA (Singapore Overnight Rate Average), plus a credit risk premium and bank spread.
SORA reflects daily unsecured overnight interbank lending rates, published by ABS. As of January 2026, 3M SORA is around 1.2%, down from 3% in early 2025.[1] Banks add 0.25%-0.60% spread for profit and risk.[2][4]
Your credit risk premium depends on credit score, income stability, debt ratios like TDSR (capped at 55% of income), and loan-to-value (LTV) ratio. Strong profiles (e.g., salaried professionals with TDSR <40%) get lower premiums.[3]
- Loan quantum: Larger loans (>S$1M) qualify for rates from 1.30% fixed.[2]
- Property type: HDB loans now beat concessionary 2.6% HDB rates; banks offer 1.55% for DBS POSB HDB loans.[1]
- Fixed vs floating: Fixed rates (1.4-1.8%) lock in for 2-5 years, then revert to SORA + margin.[1][2]
Understanding SORA and Rate Types
SORA replaced SOR/SIBOR in 2024. 3M SORA suits most mortgages for stability; 1M SORA offers quicker adjustments.[1][2] Current floating rates: 1M SORA + 0.25% (effective ~1.36%).[2][4]
Fixed rates provide certainty but higher initial costs. Example: DBS 2-year fixed at 1.6%, saving S$500/month vs 3% prior rates.[1] Track live 3M/6M SORA on Homejourney's bank rates page.
The chart below shows recent interest rate trends in Singapore, highlighting SORA movements and bank packages:
Rates have halved to 3-year lows, with modest 2026 declines expected.[1] Homejourney updates this daily for safe decision-making.
Bank Spread and Credit Risk Premium Explained
Bank spread is the margin banks add for costs/profit, typically 0.5-1% over SORA. DBS offers tight spreads due to its SGD funding dominance.[2]
Credit risk premium adjusts for your profile: Excellent credit (>2000 score via Credit Bureau Singapore) lowers it by 0.1-0.2%; high TDSR raises it.[3] Insiders tip: Maintain >20% cash reserves and stable employment for 0.1% better rates.
Compare DBS (1.55% HDB fixed), OCBC (1.40% green mortgage), UOB, HSBC packages side-by-side on Homejourney bank-rates. Minimum loans S$500k for best rates.[2][4]
Mortgage Fees Breakdown
Beyond rates, fees impact total cost: Processing (S$200-500), legal (S$1,500-3,000), valuation (S$500-2,000), admin (S$100-300).[1]
Refinancing adds these, but rebates offset: S$2,000-2,800 cashback for >S$1M loans.[2] No early repayment penalties on some DBS/OCBC packages during lock-in.[1]
- Check bank packages for subsidies (e.g., DBS legal fees waiver).
- Use Homejourney's mortgage calculator to factor fees.
- Apply via Singpass on Homejourney for instant verification, one submission to DBS, OCBC, UOB, HSBC, etc.
Fixed vs Floating: Decision Framework
| Factor | Fixed Rate | Floating (SORA) |
|---|---|---|
| Rate (2026) | 1.4-1.8% (2-3yr lock) | 1.15-1.5% (SORA+) |
| Pros | Payment certainty | Lower initial, flexible |
| Cons | Higher revert rate | Volatility risk |
| Best for | Risk-averse, short-term | High tolerance, long-term |
Assess risk: If TDSR <40%, opt floating for savings. Use Homejourney's eligibility calculator at bank-rates#calculator.[3]
Steps: 1) Check SORA trends on Homejourney. 2) Compare packages. 3) Submit multi-bank app via Singpass. 4) Consult our mortgage brokers.
Actionable Tips for Best Rates
- Refinance now: Bank rates < HDB 2.6%; OCBC saw 7x switches in 2025.[1]
- Boost profile: Pay debts, show 6 months' bank statements.
- Time lock-ins: Q1 2026 for competitive packages.[1]
- Find properties in budget via Homejourney property search.
Disclaimer: Rates fluctuate; this is not financial advice. Verify with banks. Homejourney prioritizes your safety with verified data and transparent comparisons.
FAQ
How do banks calculate my personal mortgage rate?
SORA base + your credit risk premium (0.1-0.5% based on score/TDSR) + bank spread (0.25-0.75%). Use Homejourney calculator for simulation.[1][3]
What is the lowest rate in January 2026?
1.15% floating (3M SORA +0%), 1.30% fixed for >S$500k loans from DBS/OCBC.[2]
Should I switch from HDB loan?
Yes if >2.6%; save S$4,100/year on S$500k loan. Can't revert; assess volatility.[1]
How to compare rates safely?
Visit Homejourney bank-rates for live SORA, side-by-side DBS-UOB-HSBC comparisons, Singpass apps.
What fees to watch?
Legal S$2k, valuation S$1k; offset by S$2.5k rebates. Calculate total via our tool.
Secure your rate today on Homejourney's trusted platform. Compare, calculate, and apply safely at https://www.homejourney.sg/bank-rates. Explore more in our pillar guide: Singapore Mortgage Rates 2026.
