The U.S. Federal Reserve had not officially cut interest rates by early 2025. However, SORA (Singapore Overnight Rate Average), the benchmark for most floating rate mortgages in Singapore, had already begun to fall. Why? Because SORA doesn’t just respond to what has happened, but more importantly, what markets believe will happen.
Here’s Why SORA Rate Dropped Early:
1. Markets Anticipate Fed Moves (Forward Guidance Effect)
- By early 2025, financial markets priced in a high probability of Fed rate cuts even though it has not taken effect yet.
- Yields on USD and SGD interest rate futures (like SOFR, SORA derivatives) began falling, dragging SORA rate down in advance.
Bond markets are forward-looking, not reactive.
What it means for you: Floating rate mortgages in Singapore started becoming cheaper even before any Fed announcement.
2. Shift in Global Liquidity Conditions
- Investors rotated to lower-risk assets, causing yields to fall globally.
- SGD liquidity improved, lowering local funding costs even before the Fed acted.
What it means for you: With cheaper funding, banks passed on some of the savings through more competitive home loan packages.
3. MAS Already Took a Softer Stance
- Singapore’s central bank (MAS) did not tighten monetary policy further in 2024 or 2025.
- This signalled less SGD appreciation, indirectly supporting lower interest rates.
What it means for you: No tightening = More room for SORA rate to ease, benefiting mortgage borrowers.
4. Banks Priced in Lower Funding Expectations
- Lenders anticipated cheaper funding and began lowering loan margins.
- This caused interbank rates (like SORA) to soften even in the absence of hard policy action.
What it means for you: Some lenders started offering reduced mortgage interest rates, ahead of any official central bank move.
Timeline Summary: What Likely Happened
| Period | Market Expectation | Impact on SORA |
| Q4 2024 | Fed pause, rate cuts likely in 2025 | SORA stabilizes, slight drop |
| Q1 2025 | Rate cut priced in by mid-2025 | SORA declines more sharply |
| Q2 2025 | No cut yet, but markets sure it’s coming | SORA already near 2% |
| Q4 2025 (expected) | First Fed cut | SORA may fall further or level out depending on Fed tone |
What Is 1M and 3M Compounded SORA?
SORA is the average overnight interest rate of interbank loans in SGD. However, for mortgage loans, banks don’t use the daily rate. Instead, they use compounded averages to smooth out short-term fluctuations.
1M Compounded SORA:
- The average SORA rate over the past 30 days. This is used for mortgages with monthly rate revisions.
3M Compounded SORA:
- The average SORA over the past 90 days. This is more common for mortgages that revise every 3 months.
Longer compounding periods reduce volatility, making 3M SORA a stable reference for home loan borrowers.
What it means for you: With the daily SORA on a downward trend, both 1M and 3M Compounded SORA will slowly adjust, leading to reduced mortgage payments over time for those with floating rate loans.
Key Insight
SORA is affected not only by policy actions but by sentiment, expectations, and capital flows. When markets believe that global interest rates will go down, your floating home loan rates may drop. This can happen before any official cut is announced.
💡 Thinking of refinancing or buying a property soon? Lower SORA levels mean it could be a great time to secure a better mortgage deal.