Between March 2022 and July 2023, the U.S. Federal Reserve (Fed) raised interest rates by a whooping 5.5% – from a lower range of 0% to and upper range of 5.50%. Anyone who locked in their home loans at this heightened interest rate level may be able to refinance or reprice their loans at a lower level today.
That’s because since the highs in 2023, the Fed has decreased interest rates multiple times. As of today, federal funds rates are down to 4.00 – 4.25 %, 1.25% lower than what it was about 2 years ago.
In Singapore, we have also seen interest rates decline. The current 3-month Singapore Overnight Rate Average (SORA) is at 1.08% as of 2 October 2025, down from 2.52% at the start of the year.
This also means that if you refinance your home loan today, you will enjoy a lower interest rate compared to the start of this year, and definitely a much lower rate compared to the start of 2024.
For a quick calculation, let’s assume we took a $1 million property loan at three points in time: the start of 2022, the beginning of 2024 and the start of 2025. We can see how interest rates would have affected our home loans. We will also assume a 25-year home loan.
| Interest Rates | Monthly Repayments | |
| Start of 2022 | 1.2% | $3,860 |
| Start of 2024 | 3.5% | $5,006 |
| Start of 2025 | 2.4% | $4,436 |
Based on loan rates provided by Cashew, a loan comparison platform in Singapore, we can see that the current rates for a 3-year fixed rate with a local bank is currently 1.55%.
Source: Cashew
With a rate of 1.55%, this means that a $1 million 25-year loan will have a monthly repayment of $4,023. This represents a reduction of almost $1,000 per month in repayment compared to the start of 2024, when interest rates were approximately 3.5%.
This illustrates the impact that interest rates can have on our monthly repayment, serving as a timely reminder that refinancing our home loan is crucial, especially if we can secure a lower interest rate.
How Will Your Home Loan Repayments Be Impacted In A Falling Interest Rate Environment
With U.S. President Donald Trump pressing the Federal Reserve to cut rates more aggressively, further rate reductions may be on the horizon in the coming months.
SORA rates, the benchmark against which many Singapore home loan packages are pegged, have undergone significant changes since 2022. They peaked at nearly 4.0% in December 2022 during the height of global tightening, but have since fallen steadily to about 1.0% today, the lowest level in over three years. If rates remain at these levels, banks will continue to adjust their mortgage packages downward, providing homeowners with more opportunities to refinance or reprice their loans at more affordable rates.
Source: Rates retrieved from MAS, (From January 2022 to March 2025)
All this isn’t a surprise. The Singapore Overnight Rate Average (SORA) is a volume-weighted average rate of unsecured overnight interbank SGD transactions in Singapore, administered by MAS. As global interest rates rose between 2022 and 2023, led by the Fed, so did the SORA.
However, when the U.S. started cutting interest rates in September 2024, the SORA initially experienced some volatility, rising before quickly trending downwards.
This indicates that a cut in U.S. rates may not be immediately reflected in the SORA rate. But a sustained hike or drop will eventually have an effect in Singapore.
Read Also: Guide To Understanding How SORA-Pegged Home Mortgage Loans Work
Interest Rates On Home Loans Are Lowest It’s Been In Nearly 3 Years
Home loan packages by Singapore banks are offering attractive interest rates that are lower than the HDB Housing Loan interest rate of 2.6%.
To compare home loan interest rates offered by over 16 banks and financial institutions in Singapore, we can rely on the home loan mortgage comparison tool by Redbrick.
The table below shows that some home loan packages have mostly dropped below the 2.5% level.
When taking up a fixed-term home loan, we can expect most home loan packages to offer a cheaper rate during the lock-in period, but for these rates to rise in subsequent years once the lock-in period is over. This is why it’s also vital to refinance (or reprice) your home loan.
Source: Cashew
How Home Loan Repayments Will Be Affected If Interest Rates Drop In Singapore
We can reference the Redbrick Mortgage Repayment Calculator to look at how our home loan repayments will be affected by interest.
Based on Redbrick’s calculator, if we bought a $1.33 million home and took the maximum 75% loan of $1 million (25-year loan) at the peak of home loan interest rates, our monthly repayment would be $5,006 a year.
If we can refinance our home loan today, we may be able to secure an attractive rate of approximately 1.55% p.a. This will reduce our monthly instalment to $4,023.
From this calculation, we can see that for a $1 million loan taken over 25 years, a 0.5% decline in the interest rate will result in a reduction of $240 in home mortgage repayment. If the interest rate decreases by 1%, savings will increase to $480 per year.
For those considering whether to buy a home in the slightly lower interest rate environment, you can also reference the two screenshots above to see that when interest rates were at the 3.5% mark, you need a higher income ($8,344 vs $6,705) for a $1.33 million home with a $1 million loan required.
This is because the Total Debt Servicing Ratio (TDSR) framework limits us to using only 60% of our income to repay loans that we take on.
In short, we can afford more expensive homes in a lower-interest-rate environment. While more interest rate cuts are expected, we can also see in the SORA chart in the earlier segment that it may not have an immediate impact in Singapore. Nevertheless, with banks already offering more attractive rates, the expectation is that rates will follow a similar downward trajectory.
What Should You Do In A Falling Interest Rate Environment?
It’s challenging to pause life and wait for interest rates to reach the level we desire. For those in the market to buy a home, the fixed interest rates currently on offer are reasonably reflective of the lower interest rate environment. There’s no harm (or much choice besides opting for the best financial institution) in taking up a home loan right now.
In fact, as discussed earlier, it may also be that we can afford to take a slightly bigger home loan and buy a slightly more expensive home, as interest rates are already lower today.
For existing homeowners, there typically is not much we can do. If we’re on a fixed rate for the next 1 to 2 years, we’re locked into paying slightly higher interest rates to the bank for the time being. Of course, we will want to kick-start the refinancing process as soon as possible.
That’s where the right partners come in. A trusted mortgage broker like Redbrick can help you evaluate whether to refinance or reprice with your current bank, and their Mortgage Experts even offer a free personal consultation to walk you through your options.
Meanwhile, digital platforms like Cashew let you instantly compare the best rates across banks and handle the entire loan application process, saving you both time and money.
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