Singapore home loans: SORA fell to 1.19%, but banks still test borrowers at 4%

The benchmark behind most floating home loans in Singapore has fallen by more than two-thirds. Three-month compounded SORA stood at 1.19% at the end of August 2026, against 3.75% in October 2023 1. That cuts what a floating-rate borrower pays each month. It does not raise how much a bank or HDB will lend, because both still test affordability at 4% and 3% 56.

What actually sets a household's home-loan rate?

Two rates matter, and they move for different reasons.

The first is the HDB concessionary rate. A household taking an HDB housing loan for October to December 2026 pays 2.60% a year 2. CPF Board computes it as the CPF Ordinary Account (OA) rate of 2.50% plus a 0.10% fee to cover the cost of administering the loan 2. The OA rate itself is held at its legislated minimum of 2.5% a year: the formula behind it, a three-month average of major local banks' interest rates, came to only 0.32% for May to July 2026 3. So while bank rates sit well below 2.5%, the HDB loan rate does not follow them down 23. It is reviewed every quarter and stays pegged 0.1 percentage point above the OA rate 6.

The second is a bank loan's rate. Banks offer floating rates pegged to a benchmark such as the Singapore Overnight Rate Average (SORA), or rates fixed for a set period, usually one to three years, before they revert to floating 7. The benchmark most floating packages reference is the three-month compounded SORA, which SingStat publishes each month from MAS data 1. The bank adds its own spread on top. No official source used here publishes those spreads, so this guide works with all-in rates rather than any bank's offer.

As at 8 October 2026, the official numbers that frame the decision are these:

How far have rates moved, and where are they now?

The three-month compounded SORA series in SingStat's table starts in October 2005 1. Its highest month-end reading in that series is 3.75%, in October 2023 1. By the end of August 2026 it was 1.19%, a fall of 2.57 percentage points 1.

The fall came in two stages. SORA rose from 0.17% at the end of 2020 to 3.03% at the end of 2022, then held above 3.5% every month from March 2023 to August 2024 1. It eased to 3.03% by December 2024 and 1.19% by December 2025 1. In 2026 it has moved in a narrow band, between 1.03% in April and 1.19% in August 1.

Source: SingStat table M700071, Current Banks Interest Rates (End of Period), Monthly, from MAS 1.

Longer government rates sit a little higher than the overnight benchmark. At the end of August 2026 the one-year Treasury bill yielded 1.65% and the two-year Singapore Government Securities bond 1.70% 1. Those yields are what investors accepted for lending to the government for one and two years. They are not a forecast of SORA, and future rates may move either way.

What does each rate level cost a month?

The clearest way to see what the rate environment means is to hold the loan constant and change only the rate. The table below uses a $500,000 loan, repaid in equal monthly instalments, over 25 and 30 years, at rates anchored on the official figures 256. The rate levels include the official anchors above and some round all-in rates in between. None of them is a bank's offer.

Sightlines calculation: standard amortising instalment, P x r / (1 - (1 + r) ^ -n), with r the annual rate divided by 12 and n the number of months.

Three points stand out.

First, each quarter of a percentage point is worth about $60 to $70 a month on this loan, by Sightlines' calculation 25. Moving from the HDB rate of 2.6% to 2.85% adds $64 a month over 25 years 2. The step grows slightly as rates rise: $59 a month at 1.5%, and $70 a month at the 4.0% stress rate 5.

Second, the range is wide. An all-in rate of 4.0% costs $2,639 a month over 25 years, and 1.5% costs $2,000, a difference of $639 a month across 2.5 percentage points 5. That is slightly less than SORA's 2.57-point fall since October 2023 1. A borrower whose loan moved one-for-one with SORA, on an unchanged spread, would have felt a change of roughly that size.

Third, tenure moves the instalment too. At the HDB rate of 2.6%, stretching the loan from 25 to 30 years lowers the instalment from $2,268 to $2,002 a month 2. The cost is in the total: interest over 30 years at 2.6% comes to $220,611, against $180,504 over 25 years 2.

A worked example: a couple choosing between an HDB loan and a bank loan

Take a couple buying a resale HDB flat. Their question is whether today's lower bank rates change the choice. The example uses round, checkable inputs:

What the rules let them borrow. For an HDB flat, the mortgage servicing ratio (MSR) caps all property loan instalments at 30% of gross monthly income, whether the loan comes from HDB or a bank 478. On $10,000 a month, that is $3,000 4. The rules then test that $3,000 at a stress rate 56. It is not the rate the couple will pay:

• An HDB loan is sized at the higher of 3% a year or 0.1 percentage point above the prevailing OA rate, which today means 3% 6. At 3% over 25 years, an instalment of $3,000 supports a loan of up to about $632,629 6.
• A bank loan is sized at the higher of MAS's 4% floor or the loan's thereafter rate 56. At 4% over 25 years, the same $3,000 supports up to about $568,357 5.

Both limits are above the $500,000 the couple need 56. Their stressed instalments, $2,371 at 3% and $2,639 at 4%, take 23.7% and 26.4% of income, within the 30% cap 456.

What they would actually pay. On an HDB loan at 2.6%, the instalment is $2,268 a month 2. On a bank loan, the instalment depends on the all-in rate the bank offers. At an all-in 2.0% it would be $2,119; at 1.5%, $2,000, by Sightlines' calculation from the table above. A bank loan costs less each month only while its all-in rate stays below the HDB rate of 2.6% 2.

What the rate does not show. The two loans differ in ways the instalment table misses. Under CPF Board's comparison, an HDB loan has no lock-in period and no penalty for paying it off early 7. A bank loan repaid early may carry a penalty that could be around 1.5% of the outstanding amount, with terms varying by bank 7. A household with an HDB loan can refinance to a bank loan at any time, subject to the bank's approval 7. Once it has done so, it can no longer switch back to an HDB loan, and a bank loan cannot be refinanced to an HDB loan 7.

That last rule is what turns a rate comparison into a one-way decision. Moving to a bank loan when SORA is low gives up the option to return to the HDB rate 7. That rate is pegged to the OA rate, and is 2.6% a year while the OA rate stays at its 2.5% minimum 236.

Why lower rates have not raised borrowing limits

This is the rule that holds in any rate environment. The rate a household pays and the rate it is tested at are different numbers, and the second has a floor.

For any borrower taking a bank loan to buy residential property, MAS requires the bank to test affordability on a medium-term interest rate 5. For residential property loans, that rate is the higher of a 4% floor or the thereafter interest rate 5. MAS raised that floor from 3.5% to 4% for loans where the option to purchase was granted on or after 30 September 2022 6. HDB introduced its own 3% floor for computing the eligible HDB loan amount from the same date 6. Both floors were set as rates were rising. Neither has moved down with SORA 56.

A private-property example shows how much this matters. A buyer with no other debts and a gross monthly income of $15,000 can commit up to 55% of it, or $8,250 a month, under the total debt servicing ratio (TDSR) 4. Tested at 4% over 30 years, that supports a loan of up to about $1,728,055 5. If the same $8,250 were tested at 1.5%, it would support about $2,390,471, but the 4% floor rules that out 5. The floor keeps the borrowing limit where it was when rates were high.

Run the other way, the floor sets a minimum income. A $1,000,000 private-property loan over 30 years costs $4,774 a month at the 4% stress rate 5. Staying within the 55% limit on total debt then needs a gross monthly income of at least about $8,680 4. At an all-in rate of 1.5%, the actual instalment would be $3,451, well below the tested figure 5.

The transferable lesson: when rates fall, a household's monthly cost falls, but its borrowing limit does not rise. The low rate improves cash flow. It does not make a bigger loan available.

Who this does not apply to

Several groups sit outside the worked example.

• Private property buyers. The 30% MSR applies to housing loans for HDB flats and for executive condominiums whose minimum occupation period has not expired 8. Other private property is tested on TDSR alone, as in the $15,000 example above 4.
• Buyers of non-residential property. The stress floor for non-residential property purchase loans is 5%, not 4% 5.
• Households who do not qualify for an HDB loan. HDB loans have their own eligibility conditions, which this guide does not set out. A household that is not eligible compares bank loans only.
• Borrowers on fixed-rate packages. A fixed rate does not move with SORA during its fixed period, usually one to three years, and reverts to floating after it 7.
• Borrowers with other debts. Car loans and other monthly obligations count towards TDSR, so the room left for a property loan is smaller than in the examples 4.

Maximum tenures also set limits. MAS caps bank loan tenure at 30 years for HDB flats and 35 years for other property 4. For a bank loan, the maximum loan is up to 75% of the bank's valuation or the purchase price, whichever is lower 7. For an HDB loan on a resale flat, it is up to 75% of the resale price or market valuation, whichever is lower 7.

Where CPF savings fit in

The OA rate matters for a second reason: it is what CPF savings earn while they sit in the account. From 1 October to 31 December 2026 the OA pays 2.5% a year 3.

That sets a simple comparison for any household choosing whether to pay down a loan with OA savings. Money used to reduce a loan saves the loan's rate. Money left in the OA earns 2.5% 3. On an HDB loan at 2.6%, the two are 0.1 percentage point apart 2. On a bank loan at an all-in rate below 2.5%, the OA earns more than the loan costs, so long as rates stay where they are 3.

The comparison has limits. A floating loan's rate can rise above the OA rate within a year, as it did in 2022, when three-month SORA went from 0.21% in January to 3.03% in December 1. Savings used for housing also carry CPF rules on refunds when the property is sold, which this guide does not cover.

What would change the answer?

A few conditions would shift the comparison between an HDB loan and a bank loan, or the size of the instalment.

• SORA rising again. A floating loan's rate follows SORA up as well as down. Each quarter-point rise costs about $60 to $70 a month on a $500,000, 25-year loan. In 2022, three-month SORA rose by 2.82 percentage points in 11 months 1.
• The OA rate rising above its floor. The HDB rate tracks the OA rate plus 0.1 percentage point 6. The OA rate is at 2.5% only because the bank-rate formula behind it, at 0.32%, sits below the legislated minimum 3. The formula would have to rise above 2.5% before the HDB rate moved.
• A change to the stress floors. The 4% and 3% floors are set by MAS and HDB 56. A change would move borrowing limits for new loans, not instalments on existing ones.
• Doing nothing. For a household already on an HDB loan, keeping it is a valid answer. It keeps a rate of 2.6% a year for October to December 2026 and keeps the option to refinance later 27. Switching gives up that option for good 7.

A decision rule falls out of the numbers. Compare the bank's all-in rate with 2.6%, then ask how far SORA would need to rise before the bank loan cost more, and whether the household could carry that instalment. Count any lock-in penalty and refinancing costs as part of the price 7.

This is general information, not financial advice. Check the current rules with IRAS, HDB, CPF Board or your bank before you commit.