Home loan rates: fixed, floating, and when to refinance

What you are actually buying

A floating package is quoted as a spread over a benchmark — usually compounded SORA over one or three months. SORA is published by MAS and reflects actual overnight lending between banks, so it cannot be set by your lender. When SORA moves, your repayment moves with it, at the next reset.

A fixed package holds your rate for a stated period, after which it reverts to a floating rate that is often materially worse than anything on offer to a new customer. The fixed rate is what you see; the reversion is what you pay for the rest of the loan, and it is the number worth asking for.

The HDB concessionary loan sits outside both. It is fixed by policy rather than by a bank, it does not have a lock-in, and it can be refinanced away to a bank — but never refinanced back. The rate decides what the loan costs, not how large it can be — that is set by the Total Debt Servicing Ratio before any package is quoted — and whatever the rate, the purchase still pays Buyer's Stamp Duty on top.

The three numbers that decide it

First, the reversion rate: what this package becomes when the promotional period ends. A low fixed rate for two years followed by an expensive float is a worse deal than a slightly higher rate that reverts sensibly.

Second, the lock-in and its penalty. Committing to a low rate is only an advantage while it stays low relative to the market — a lock-in that outlasts the advantage is a cost, not a saving.

Third, the cost of moving: legal and valuation fees, and any clawback of subsidies your current bank paid on your behalf if you leave inside their claw-back window. A saving that takes four years to repay the switching cost is not a saving if you intend to sell in three.

Refinancing or repricing

Repricing means taking a new package from your existing bank. It is cheaper and faster — no fresh legal work, no new valuation — but the pricing is retention pricing, and retention pricing is reliably worse than the offer made to win a customer from elsewhere.

Refinancing means moving the loan to another lender. It costs more up front and takes weeks, and it requires passing the servicing tests again at the current stress floor of 4% — which is not automatic if your income has changed or you have taken on other debt since.

The usual sequence is to get a refinancing quote first, then ask your own bank to match it. That costs one phone call and is frequently worth more than the difference between any two advertised rates.

Fixed or floating

This is a question about your tolerance, not about a forecast. Fixed buys certainty and you pay for it; floating is usually cheaper on average and occasionally uncomfortable.

The honest test is not which will cost less — nobody knows — but whether a rise of two percentage points would force you to change how you live. If it would, buy the certainty. If it would not, the cheaper average is usually the better long-run choice.

Common questions

What is SORA?

The Singapore Overnight Rate Average, published by MAS from actual overnight interbank borrowing. Floating home loans are priced as a spread over compounded SORA, so the benchmark cannot be set by your lender.

Is refinancing better than repricing?

Usually, on rate. Banks price harder to win a customer than to keep one. But refinancing carries legal and valuation costs and requires passing the servicing tests again, so the saving has to clear those before it is real.

Should I choose a fixed or floating home loan?

It depends on whether a two-point rise would force you to change how you live. If it would, pay for the certainty of a fixed rate. If not, floating is usually cheaper over a full loan term.

Can I refinance an HDB loan to a bank?

Yes, and many do when bank rates fall below the concessionary rate. The move is one-way — once you have refinanced to a bank, you cannot return to an HDB loan.