How Banks Determine Your Mortgage Interest Rate in Singapore
This definitive Homejourney guide reveals exactly how Singapore banks set mortgage rates – from SORA benchmarks and credit risk premiums to bank spreads and borrower profiles. Whether you're a first-time HDB buyer or refinancing a condo, understanding how banks determine your mortgage interest rate empowers confident decisions in 2026's competitive market.
Homejourney prioritizes your safety with verified bank rates, Singpass-enabled applications, and multi-bank comparisons – all in a trusted platform built on transparency and user feedback.
Table of Contents
- Executive Summary
- 1. Mortgage Rate Types in Singapore
- 2. SORA: The Core Benchmark for Floating Rates
- 3. How Banks Set Rates: Funding Costs + Spreads
- 4. Your Profile: Credit Risk Premium & Key Factors
- 5. Fixed vs Floating: Comparison & Decision Framework
- 6. 2026 Bank Rates from DBS, OCBC, UOB & More
- 7. HDB Loans vs Bank Loans: When to Switch
- 8. Calculators & Tools for Accurate Projections
- FAQ: Common Questions on Mortgage Rates
- Next Steps with Homejourney
Executive Summary: Key Factors in Interest Rate Determination
Banks determine your mortgage interest rate through a formula: benchmark rate (like SORA) + bank spread + credit risk premium. In Singapore, interest rate determination starts with market benchmarks set by the Monetary Authority of Singapore (MAS), layered with each bank's funding costs and your personal risk profile[1][2].
As of January 2026, floating rates hover around 3M SORA + 0% to 0.25% (effective ~1.15-1.36%), while fixed rates start from 1.30% for qualifying loans over $500k[3]. Homejourney's bank rates page lets you compare DBS, OCBC, UOB, HSBC and more side-by-side, with live SORA tracking.
This 2026 pillar covers mortgage rate factors exhaustively, with real examples, tables, and insider tips to help you secure the best rate safely.
1. Mortgage Rate Types in Singapore
Singapore mortgages fall into two main categories: fixed-rate and floating-rate (pegged to SORA). Fixed rates lock in for 1-5 years, offering payment stability. Floating rates adjust with market benchmarks, typically lower initially but variable[1][2].
HDB concessionary loans remain at 2.6% (CPF OA + 0.1%), but bank loans now undercut this, driving switches[2]. Key insight: Banks like DBS offer 'fixed-flexi' packages with free conversion after lock-in, blending stability and flexibility[3].
Rate Types Comparison Table
| Rate Type | Pros | Cons | Best For |
|---|---|---|---|
| Fixed (1-5 years) | Predictable payments; protects from rate hikes | Higher initial rate; lock-in penalties | Risk-averse buyers, HDB upgraders |
| Floating (SORA-pegged) | Lower starting rates; falls with market | Payment volatility; rises if SORA climbs | Investors, high-income borrowers |
| HDB Concessionary | Stable 2.6%; CPF usage | No cash rebates; can't revert post-switch | First-time HDB buyers |
Use Homejourney's mortgage calculator to test scenarios[5][6].
2. SORA: The Core Benchmark for Floating Rates
SORA (Singapore Overnight Rate Average) is the volume-weighted average of overnight interbank SGD rates, published daily by MAS. It replaced SIBOR for transparency, reflecting actual transaction costs[1].
Key variants: 1M, 3M, 6M compounded SORA. 3M SORA is most common for mortgages (~1.2% as of Dec 2025)[2][3]. Banks add a bank spread (0-0.5%) atop SORA.
The chart below shows recent interest rate trends in Singapore, tracking 3M and 6M SORA over the past 6 months:
As visible, SORA fell from 3% to 1.2% in 2025, halving many floating rates. Expect stability in 2026 barring US Fed shocks[2]. Track live SORA on Homejourney.
3M vs 6M SORA: Which to Choose?
- 3M SORA: Adjusts quarterly; more responsive (~1.15% effective now)[3].
- 6M SORA: Smoother but lags market; suits long-term stability.
Insider tip: For HDB resale in mature estates like Toa Payoh, opt 3M SORA + low spread from OCBC for flexibility[2].
3. How Banks Set Rates: Funding Costs + Spreads
How banks set rates boils down to: Benchmark (SORA) + Bank Spread + Credit Risk Premium. Banks fund loans via deposits/global markets, adding a bank spread (0.2-0.5%) for profit and costs[1].
Larger loans (>$500k) get tighter spreads due to lower relative risk. Global Fed policy flows through: 2025 cuts dropped SORA sharply[2].
Original insight: In 2026, banks compete via 'promotional spreads' (e.g., SORA + 0% Year 1), but check post-promo cliffs[3]. Compare on Homejourney to avoid pitfalls.
Bank Spread Breakdown
| Component | Typical Range | Impact on $500k Loan |
|---|---|---|
| SORA (3M) | 1.15-1.2% | $479/month interest |
| Bank Spread | 0-0.5% | $0-$208/month |
| Credit Risk Premium | 0-0.3% | $0-$125/month |
Calculations assume 25-year tenure[5].
4. Your Profile: Credit Risk Premium & Key Factors
The credit risk premium is banks' add-on for your default risk, based on income stability, debt ratios, and credit score. Clean Credit Bureau Singapore (CBS) record? Expect 0-0.1% premium[1].
Mortgage rate factors include:
- TDSR/MSR: Debt <55% income at 4% stress rate (MAS rule)[4].
- Loan-to-Value (LTV): Up to 75-90% for HDB.
- Age/Tenure: Max tenure 75 - age; shorter = better rates.
- Property Type: HDB tighter; private more flexible[1].
Example: $10k/month income family buying $800k Punggol BTO. Strong profile gets DBS SORA + 0.1%[3]. Use Homejourney calculator for your scenario.
5. Fixed vs Floating: Comparison & Decision Framework
Fixed suits payment certainty; floating for potential savings. In 2026's low-rate environment, floating edges out if SORA stays ~1.2%[2].
Decision Framework:
- Assess risk tolerance: Fixed if budget tight.
- Check lock-in: Avoid if planning sale <2 years.
- Model scenarios on Homejourney calculator.
- Reprice every 2 years via Singpass[2].
Refinancers saved $500/month switching to 1.6% fixed (DBS example)[2]. See related: Bank Rates Comparison.
6. 2026 Bank Rates from Major Partners
As of Jan 2026, top rates (min $500k loan):
- DBS: 1.55% 3Y fixed; 3M SORA + 0.1%
- OCBC: 1.50% 2Y fixed; 1M SORA + 0.25% (1.36% eff.)[3]
- UOB: 1.30%* 2Y fixed
- HSBC/Standard Chartered: 1.35-1.50% fixed; subsidies $2k+
*Conditions apply. Full comparison on Homejourney bank-rates. Rates for larger loans/strong profiles[3].
Switch from HDB? OCBC saw 7x uptake in 2025, saving $4,100/year on $500k[2].
7. HDB Loans vs Bank Loans: When to Switch
HDB at 2.6% vs banks ~1.5%: Switch if >5-year horizon and volatility-tolerant[2]. Can't revert; DBS POSB HDB reprice at 1.55% no-penalty[2].
Practical advice: For Yishun HDB upgrader, bank loan + Homejourney multi-bank app gets best offers fast.
8. Calculators & Tools for Accurate Projections
Test rates with DBS-style schedules: $500k @1.5%, 25Y = ~$2,300/month[5]. Homejourney's tool factors TDSR, SORA live data.
Apply via Singpass: One form, multiple banks respond. Link to property search post-approval.
FAQ: Mortgage Rates in Singapore
Q: How do banks calculate my exact rate?
A: SORA + spread (funding) + premium (your risk). Varies by profile/loan size[1].
Q: What's the lowest rate in 2026?
A: 1.15-1.30% for $500k+ (fixed/floating)[3]. Check Homejourney daily.
Q: Should I fix or float now?
A: Float if expecting stability; fix for certainty. Use our calculator[2].
Q: Impact of 0.25% rate change?
A: +$100-200/month on $500k loan[6].
Q: HDB to bank switch costs?
A: Legal/valuation ~$2-3k; savings outweigh[2].
Q: How to improve my rate?
A: Lower debt, higher deposit. See Improve Approval.
Next Steps: Secure Your Best Rate with Homejourney
1. Compare live rates: Visit bank-rates.
2. Calculate affordability.
3. Apply via Singpass – get offers from DBS, OCBC, etc.
4. Search properties: Homejourney search.
Disclaimer: Rates change; not financial advice. Consult professionals. Homejourney verifies data for your safety.
Read more: Singapore Mortgage Guide.
