Why Floating Rate Home Loans Might Be the Smartest Financial Move You Can Make in 2025

For many homeowners in Singapore, 2025 is starting to feel like a time of confusion when it comes to choosing the right home loan package.

Fixed rates are looking attractive at 2.35%, while floating rates seem higher at SORA + 0.25%, which translates to around 2.45% today. On paper, fixed seems like the safer bet. And for most people, it might feel like the logical one too.

But here’s the truth: we’re standing at the top of the interest rate mountain. And what goes up, must come down.

The Interest Rate Cycle Is Turning

Over the past two years, global interest rates—including those in Singapore—have risen steadily in response to inflationary pressures. However, recent developments indicate a potential shift in this trend.

• In January 2025, the Monetary Authority of Singapore (MAS) eased its monetary policy for the first time since March 2020, citing slower-than-expected inflation and economic growth
• Subsequently, in April 2025, MAS implemented a second consecutive policy easing, adjusting the exchange rate-based policy by slightly reducing the appreciation rate of the Singapore dollar nominal effective exchange rate (S$NEER) band. This move aimed to mitigate pressures from diminished demand and tighter global financial conditions.

These policy adjustments suggest that floating interest rates are likely to decline in the near future, potentially offering more favorable conditions for borrowers.

The Risk–Reward Equation Favors Floating

Let’s walk through the numbers.

Today:

• Fixed rate: 2.35%
• Floating rate: SORA (2.2%) + 0.25% = 2.45%

So yes, you’re technically paying 0.1% more on a floating package right now.

For a $1.5 million loan, that’s about $1,500 extra per year.

But what happens if SORA drops to 1.8%? You’ll be paying just 2.15%. If it drops to 1.5%? Your rate becomes 1.75%.

That’s a potential $9,000 in annual savings. (0.6% lower than the fixed!)

So the question becomes: Would you spend $1,500 now for a realistic shot at saving $18,000 over the next two years?

For most financially-savvy homeowners, the answer is obvious.

“Can I Wait Till SORA Drops, Then Switch?”

Many people assume they can wait until floating rates become attractive, then refinance into one. That sounds smart—until you realise how the banks play the game.

Here’s what we’ve seen in every cycle:

• When SORA is high, banks keep the spread low.
• When SORA drops, the spread increases.

Today, you can still get a spread as low as 0.25%. But once SORA drops to 1.5% or below, don’t be surprised if the spread climbs to 0.8% or even 1%. That means your effective rate won’t be much lower than today’s.

Waiting might cost you the best deal.

A Note From Experience

Personally, I only ever take a floating rate once every interest rate cycle—and it’s always at this point: the peak, just before the fall.

I did it in 2020 when SIBOR was already 1.9%, and I ended up paying 0.6% interest when SIBOR dropped to 0.4%. It was the lowest rate I’ve ever seen—and it stayed that way for 2 years.

Back then, most people chose fixed rates because floating felt unpredictable. But those who understood the cycle came out on top.

I believe we’re at that same moment now. The signs are all there.

Why This Matters for the Bigger Picture

You might be wondering: Why is the government even easing monetary policy? Because Singapore’s currency has gotten so strong that it’s hurting businesses. Investors worldwide are pouring money into SGD for its stability and high rates, which strengthens the dollar even further. But this makes it harder for exporters, SMEs, and local businesses to stay competitive.

The MAS doesn’t want the Singapore Dollar to get too strong. Which is why it’s acting now, and why it will likely continue to act throughout the year.

As monetary policy continues to ease, interest rates will follow.

So, What Should You Do?

If you're looking to take a new loan, or refinance your current one, here's the summary:

• Yes, fixed rates are lower today—but they won’t stay competitive once floating rates start to fall.
• Floating rates are a short-term tradeoff for long-term gains.
• You’re paying a little more now to potentially save a lot more later.
• The best spreads (SORA + 0.25%) are available now. Once rates drop, they’ll be gone.

You don’t need to be reckless. You just need to be strategic—and understand how the cycle works.

Final Thoughts

The mortgage market isn’t about playing it safe. It’s about playing it smart.

If you’re making a long-term decision like a home loan, think beyond what’s true today. Look at where the market is heading.

And everything—policy signals, interest rate trends, historical cycles—points to this: Floating is the move.

Want help navigating your options?

At Mortgage Master, we specialise in finding the loan that fits you—not the bank’s agenda. We’ll tell you what we’d take ourselves, and what we believe makes sense based on the data.

Chat with us for a free consultation. No pressure, no fluff—just solid advice.