Buying a property in Singapore requires a large downpayment. The amount depends on factors like property type, loan eligibility, and how you finance it. Understanding the different downpayment structures can help homebuyers plan their finances effectively.
🔼 When Interest Rates Rise
1. Higher Monthly Repayments (for Floating Rates)
If you’re on a floating rate package (e.g., 3M or 1M compounded SORA + spread), a rise in rates will increase your monthly instalments.
- For example, if SORA rises from 2.5% to 3.5%, a $500,000 loan over 25 years could see monthly payments go up by $260.
2. Reduced Affordability for New Buyers
Higher rates increase debt servicing, which impacts:
- Total Debt Servicing Ratio (TDSR): As loan instalments rise, buyers qualify for smaller loan amounts.
- This means lower borrowing limits and possibly needing a larger cash downpayment.
3. Impact on Fixed Home Loan Rate Packages
If you’re on a fixed-rate loan:
- You’re protected from rising rates only during the lock-in period (1–5 years).
- After that, your rate usually changes to a floating rate. This means your repayments may go up or down based on the interest rate after the fixed rate ends. You can avoid this by refinancing to a different loan package.
🔽 When Interest Rates Fall
1. Lower Monthly Repayments
With falling rates, your SORA-linked loan will automatically adjust down, reducing your monthly repayments.
- This frees up monthly cash flow and can help with budgeting or investments.
2. More Attractive Home Loan Packages
Banks often revise rates downward when market rates drop. You might benefit from:
- Refinancing to a lower-rate package
- Repricing within the same bank
Therefore, it might be beneficial to keep an eye on market offerings, as you might be able to find a lower home loan rate.
3. Improved Loan Eligibility
With lower interest rates:
- Your TDSR calculations improve
- You may qualify for larger loans or higher property prices
SORA in Focus (2024–2025 Trend)
The 1M SORA has been declining in early 2025 because:
- Easing global inflation
- Anticipation of U.S. Federal Reserve rate cuts
- Softer economic outlook in key markets
This trend could make floating-rate home loans more attractive in the near term, but borrowers should still watch for future volatility.
You can monitor SORA movements here: Monetary Authority of Singapore
Summary: How to Respond
| Rate Trend | What to Do |
| 📈 Rising Rates: | Lock in fixed rates, refinance early, reduce debt |
| 📉 Falling Rates: | Consider floating rates packages, refinance to lower, increase affordability |
Conclusion
We can create a personalised repayment simulation based on your income, loan amount, and current interest rates using real numbers to help you compare with confidence.
Plus, IQrate can help you keep track of your refinancing date and easily compare the latest home loan offers in the market.
Need help exploring your home loan options in Singapore? We’re here to assist!