This contributed article was written by Clive Chng, associate director of Redbrick Mortgage Advisory.
According to market data by Redbrick Mortgage Advisory, this year began as one of the cheapest times for homeowners to borrow from their banks in years.
In January, two-year fixed packages among most local banks were going for about 1.40% to 1.55%, and the best deals were as low as 1.35%. Likewise, three-year fixed rates were almost the same. Some HDB owners could even lock in a five-year fixed rate at around 1.78%.
When a three-year fixed rate costs about the same as a two-year package, it’s only natural that most homeowners will lean toward the three-year fixed rate. And that’s what we saw occur in the mortgage market at the start of this year. A large number of homeowners took the three-year fixed rate, which enabled them to lock in the lowest cost for the longest time.
But after rates started to dip very slightly in March, we saw that market conditions and the geo-political environment started to shift. By May, three-year fixed rates had crept up to about 1.60% to 1.65%, and they kept rising throughout the month of June.
Only two-year fixed rates stayed relatively low.
That split matters because banks price fixed rates on where they think rates are going, not where they are today. When the gap between two-year and three-year rates widens, it’s usually a sign that the market expects rates to be higher further out.
Our own compilation of loans over the past nine months shows the same pattern:
| Month (2026) | Chose 2-year fixed | Chose 3-year fixed | Typical 2-year fixed rate | Typical 3-year fixed rate |
|---|---|---|---|---|
| January | 23% | 44% | 1.45% | 1.55% |
| February | 28% | 44% | 1.45% | 1.55% |
| March | 29% | 38% | 1.38% | 1.55% |
| April | 34% | 43% | 1.45% | 1.55% |
| May | 32% | 38% | 1.45% | 1.65% |
| June | 43% | 34% | 1.45% | 1.70% |
| July | 48% | 35% | 1.45% | 1.70% |
| August | 49% | 30% | 1.49% | 1.70% |
| September (to date) | 59% | 22% | 1.50% | 1.65% |
Do note that “Typical” is the median rate accepted that month. Borrowers usually accept an offer a few weeks after it’s quoted, so these figures run slightly behind the market.
It’s clear that local banks are responding decisively to macro-economic changes and ongoing geo-political turmoil. Based on our observations, there are three things that stand out.
The three-year fixed rate lost its appeal. In January, three-year fixed packages were most homeowners’ first choice, accounting for 44% of the loans signed that month. But by September, this had halved to 22% and the two-year fixed rate took its place. The typical gap between the two rates grew from 0.10% to 0.25% over that nine-month period. Once that happened, locking in an extra year stopped being worth it for most people.
HDB owners felt the increase sooner. The five-year fixed rate, offered exclusively to HDB owners, rose from 1.78% in the first four months of this year to 1.98% by June. Today’s quotes are higher still at about 2.08%, and many market watchers expect this to rise further.
Loan size matters as well. Between July and September, clients borrowing more than $1.5 million got a typical two-year fixed rate of 1.40%. On the other hand, those who borrowed under $500k paid 1.65%. We saw that the sharpest pricing by most banks was reserved for the larger quantum loans, and that gap has widened as rates have risen.
Overall, the sharpest move has come in the last month or so. For larger loans, the lowest two-year fixed rates today are about 1.50% to 1.65%, compared with the 1.35% borrowers could get earlier in the year. When this article is published, I reckon that the best three-year fixed rates for loans of $1 million and higher would be about 1.85% to 2.55%. For a more typical loan of around $500k, the three-year fixed rate would have likely crossed 2%.
Will local banks continue to raise rates, and where might they be by 1H2027?
Banks have already started raising rates, and I don’t think it’s a reaction to the rate hike in September by the US Federal Reserve. The markets would have expected a higher probability of a hike and would have largely priced it in.
Instead, what many local banks are pricing now is the chance of more hikes to come. The Fed’s own projections point to one more rate hike before the end of the year. Inflation in the US is still at 3.4%, amid stubbornly higher energy prices.
For Singapore, the benchmark rate that matters is the Singapore Overnight Rate Average (SORA). The three-month compounded SORA is around 1.23% today. The one-month rate has moved above that level, which usually means floating rates are heading in an upward direction.
Most bank analysts expect the three-month SORA to end the year at about 1.40%.
If that happens and the Fed follows through with another rate hike, I expect that the three-year fixed rates will average around 2.20% - 2.30% by 1Q2027. Likewise, the two-year fixed rates for larger quantum loans are likely to inch up to 1.95% - 2.20%.
It’s hard to forecast beyond that, and there are a few other things to weigh:
- MAS doesn’t manage interest rates. It manages the Singapore dollar’s exchange rate, so SORA doesn’t move one-for-one with US rates. It usually rises more slowly.
- Banks compete hard for home loans. When rates rise, banks may cut their margins to keep winning over other customers to drive up their business, which softens the overall increase felt by homeowners.
- The US Fed doesn’t expect to keep hiking its interest rates. Its own projections show rates holding steady in 2027.
My base case for 1H2027 is that rates level off at around 2.2% to 2.4%, rather than climbing steadily higher. As always, it depends on the data. If energy prices ease and US inflation cools, fixed rates could move in an altogether different direction.
Which packages look most attractive today?
In reality, banks adjust their rates so frequently that naming specific packages would be out of date within weeks. So instead, here’s a quick picture of where rates are today and what I’d look for in any package:
- Floating packages are the cheapest option right now, at about 1.40% to 1.60%. They’re pegged to SORA or a rate the bank sets itself (like the FHR6 from DBS).
- Two-year fixed packages start from about 1.50% to 1.80% for loans of $1m or more. For smaller loans they’re closer to 1.80% to 2.00%.
- Three-year fixed packages for most banks start at about 1.85% for larger loans, and are already above 2.05% for most typical loans.
- Five-year fixed packages are popular with HDB owners and are sitting at around 2.08% but we are expecting an upward revision to the 5 year fixed rate.
Crucially, we would still advise that homeowners look out for these factors: namely, don’t rush to compare the lowest prevailing interest rates. If we’ve learned anything over the last couple of years, it’s that everyone’s requirements are slightly different, so what may be good for others, may not be good for you.
In a market that’s still moving, these factors should be top-of-mind compared to a few basis points.
- Free conversion, and when it applies. Some packages let you switch to another package within the same bank for free after 12 months. Others only allow it once the lock-in ends. The earlier you can convert, the easier it is to move if rates level off or fall.
- Penalty-free partial prepayment. Some banks let you pay down part of your loan during the lock-in without a penalty (The usual penalty you’d be charged is 1.50% on the amount prepaid). If you’re on a floating interest rate, then this might be useful if rates spike as you have the option to use spare cash to reduce your loan and save on paying additional interest.
- Selling during the lock-in. Check whether the redemption penalty is waived if you sell the property, and whether the waiver is full or only 50%. A penalty of 1.50% of your loan is an expensive surprise if your plans change and you decide to sell the property within the lock-in period.
- The rate after the lock-in. Look past the first two years. Some packages look cheap early on, then jump to SORA plus a high spread after the lock-in ends. That later rate is what you’ll pay if you don’t refinance on time.
- What the rate is pegged to. Most floating packages track SORA, which moves with the market. Some track a rate the bank sets itself, such as a fixed deposit rate. That rate won’t always move in step with SORA, which can work for you or against you.
- Eligibility conditions. Many of the lowest rates come with conditions: a minimum loan of $1m or more, priority or premier banking status, or signing up for a credit card. Also check whether you have to pay back any legal or valuation subsidy if you refinance early (what we call the clawback period).
Overall, with rates moving this quickly, leaving many homeowners struggling to brush up on the latest information, the cheapest rate today isn’t the goal. What matters is being able to change course when the market does.
This article is for general information only and isn’t financial advice. Rates are indicative as at 28 September 2026 and change often. Please speak to a mortgage advisor about your own situation.
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