It feels like just yesterday I was helping a client secure financing for his landed home. The year was 2023, and mortgage rates were at a 20-year high. With the 3-month SORA at 3.70%, we went with a 2-year fixed rate package at a competitive 3.05%. It was the safe, sensible option at the time.
Fast forward to today, and we just had his refinancing review. The market has changed dramatically. The same “safe” choice from 2023 might now be the most expensive one.
The Market Has Changed. Here’s How.
The global economic landscape looks completely different from just a year ago.
- U.S. Inflation: Inflation in the U.S. has cooled significantly, now at around 2.7%.
- Fed Rate Cuts: The U.S. Federal Reserve began its first rate cut since 2019 in September 2024.As of today, August 2025, the Fed Rate sits at 4.33% after a series of cuts.
- 3M SORA: Singapore’s 3-month SORA has followed suit, falling to about 1.71%.
As a result, floating rate packages—for example, a package of 3M SORA + 0.25%—now offer an all-in rate of around 1.96%. This is incredibly competitive and, in some cases, even lower than the current fixed-rate options.
So, the obvious question arises: Should you go floating?
Should You Go Floating? Three Questions to Ask Yourself.
Deciding on a mortgage package isn’t just about the lowest rate today. It’s about your long-term strategy. Here are three key considerations to help you decide.
1. The Crystal Ball Question: Will Rates Keep Dropping?
No one has a crystal ball, but we can look at the direction of policy. Both the Fed and the Monetary Authority of Singapore (MAS) have been easing monetary policy to stimulate growth. If inflation remains in check, we are likely to see a continued low interest rate environment over the next 12 to 18 months, making floating rates more attractive for the foreseeable future.
2. The Tools: How to Manage the Risk.
Just because floating rates are unpredictable doesn’t mean you have to take on unnecessary risk. Smart structuring of your loan package is key. Look for features like:
- Flexibility to switch: Many lenders now allow you to switch between floating and fixed rates after just 6 or 12 months. This allows you to “capture” the low point of the cycle and lock in when it makes the most sense.
- Partial principal repayment: This allows you to reduce your loan size without penalty, which is a great way to manage your interest cost if rates do rise unexpectedly.
- Interest Offset Accounts: Certain packages link your savings to your loan, allowing your deposits to earn the same interest rate as your mortgage, effectively reducing your overall interest cost.
3. The Mindset: Are You Managing Risk Wisely?
This isn’t about being a risk-taker; it’s about being a risk manager. While a fixed rate offers peace of mind, locking in too early on a downtrending market can mean paying more over the long term.
Ask yourself: Are you prepared to monitor and adjust your mortgage strategy? Or will you engage a professional mortgage advisor to do so?
With the right tools and guidance, the risk of a floating rate package can be mitigated, and the rewards can be significant—especially in a market that’s trending downwards.
Final Thoughts
There’s no one-size-fits-all answer. But if you’re approaching the end of your fixed-rate lock-in or are exploring refinancing, floating rate packages now deserve serious consideration.
We are in a very different rate environment than we were just 12 months ago. And the tools and strategies available today make it possible to manage the risks while positioning yourself to benefit from potentially lower financing costs.
As always, if you’d like to discuss how to tailor the right mortgage strategy for your needs, I’d be happy to help.
