If you’re planning to buy a home or refinance your mortgage, you’re probably asking yourself:
Should I lock in a fixed rate now, or wait for floating rates to drop?
For the past two years, we’ve been stuck in a high-interest rate environment. Now, experts are saying rates should start dropping in 2025. But the real question is: how much and how fast?
While many homeowners are holding out for floating rates to fall, the reality is that floating rates are still higher than fixed rates today. The timeline for them to drop below fixed rates is also unclear. Meanwhile, buyers waiting for the “perfect moment” to refinance could end up paying more while they wait.
So, should you lock in a fixed rate now, or gamble on floating rates? Let’s break it down.
Why Do Mortgage Interest Rates Fluctuate?
Home loan rates don’t just go up and down randomly—they follow economic cycles. The biggest driver of interest rates? Inflation.
- When inflation is high, central banks increase interest rates to slow down spending.
- When inflation is under control, rates are typically lowered to stimulate borrowing.
Singapore’s mortgage rates are also heavily influenced by the US Federal Reserve (Fed). Since the Singapore dollar is tied closely to the US dollar, if the Fed cuts rates, home loan rates here will likely follow—but banks may not pass on the full savings immediately.
What History Tells Us About Mortgage Rates
If we look at past rate cycles, we start to see a pattern:
| Year | Event | Impact on Interest Rates |
|---|---|---|
| 1998 | Asian Financial Crisis | Rates spiked to 5%, then dropped 4.7% in 14 months. |
| 2008 | Global Financial Crisis | Rates peaked and then dropped 5% within 17 months. |
| 2019 | Pre-COVID Rate Hike | Mortgage rates started rising. |
| 2020 | COVID-19 Pandemic | Rates dropped to an all-time low of 1-2%. |
| 2022-2023 | Inflation Surge | Mortgage rates surged to 3.0% - 3.5%. |
| 2025? | Gradual Rate Adjustments | Rates might ease, but not dramatically. |
Typically, mortgage rates rise for two years, stay high for two years, then drop for six years. If this cycle holds, rates should start easing in 2025.
But here’s the catch: the drop might not be as steep or as fast as we hope.
Will Mortgage Rates Go Up or Down in 2025?
Why Mortgage Rates Might Drop
- The US Fed has signaled that it may start cutting rates in late 2024 or early 2025.
- Singapore’s 3M SORA rate (which affects floating home loans) is projected to drop from 2.9% today to 2.2% - 2.6% by the end of 2025.
- Some banks have already lowered their fixed-rate home loan packages, signaling that they expect borrowing costs to ease.
Why Mortgage Rates Might Stay High
- Inflation remains a wild card—if prices don’t cool fast enough, central banks might delay rate cuts.
- Even when rates do drop, banks won’t pass on savings immediately.
- Experts agree that rates will not return to the ultra-low levels of 2020-2021.
Bottom line? Rates may drop, but not drastically or quickly enough to justify waiting.
Fixed vs Floating Rate: Which is Better in 2025?
Here’s where things get interesting. Right now, fixed rates are actually lower than floating rates—which is pretty rare.
Here’s where things get interesting. Right now, fixed rates are actually lower than floating rates—which is pretty rare.
Floating-Rate Home Loans: What’s the Risk?
- Many homeowners are holding out, thinking floating rates will eventually drop below fixed rates.
- The problem? No one knows when that will happen.
- In the meantime, you’re paying more every month while waiting for a small rate drop that may take months or even years.
Fixed-Rate Home Loans: The More Economical Choice?
- Fixed rates are already lower than floating rates, so you start saving immediately.
- You’re protected from rate fluctuations, so even if banks delay lowering floating rates, you’re locked in at a better rate.
- Even if floating rates drop later, the amount you “save” may not be enough to make up for months of higher payments.
Which One Should You Choose?
- If you want certainty, locking in a fixed-rate home loan now is the safer choice.
- If you wait for floating rates to drop, you could end up paying more for months (or even years) before seeing real savings.
- The best move? Secure a fixed rate now and avoid the uncertainty.
Why Refinancing to a Fixed-Rate Loan Makes Sense Now
If you’re still on a floating-rate home loan, now might be the time to refinance to a lower fixed rate.
Key reasons to refinance now:
- Floating rates are still high, and waiting for them to drop could cost you more in the short term.
- With fixed rates lower than floating, waiting could cost you. Talk to a mortgage expert like us today to lock in the best deal.
- Even if rates drop later, the decrease is expected to be gradual, not drastic.
What to Consider When Refinancing
Not all fixed-rate home loans are the same. Before you refinance, check:
- The lock-in period – Some fixed-rate packages tie you in for 2-3 years, while others are more flexible.
- Bank promotions – Some banks offer cashback or legal fee subsidies when you refinance.
- Overall financial impact – A mortgage broker can help you compare which package makes the most sense long-term.
What Should Homebuyers and Homeowners Do Now?
For Homebuyers (New Launch or Resale Properties)
- Lock in a fixed-rate loan to take advantage of lower rates now.
- Avoid waiting for floating rates to drop, as the timeline is too uncertain.
For Homeowners Looking to Refinance
- If your mortgage rate is above 3.5%, refinancing can lower your monthly payments.
- Work with a mortgage broker to find the best fixed-rate deal with a lock-in period that makes sense for you.
Get Expert Mortgage Advice Before Making a Move
Choosing the right home loan is one of the biggest financial decisions you’ll make. The good news? You don’t have to do it alone.
At Mortgage Master, we help:
- Compare the best mortgage rates from all major banks.
- Secure exclusive fixed-rate deals that banks don’t always advertise.
- Give expert advice on refinancing and lock-in periods.
Thinking of buying or refinancing? Contact Mortgage Master today for a free consultation!
Final Thoughts
Yes, interest rates are expected to drop—but the decline won’t be as big or as fast as many are hoping for.
Right now, fixed rates are lower than floating rates, and with no clear timeline on when floating rates will fall below fixed, waiting is a costly gamble.
The best move? Lock in a fixed-rate home loan now and get the certainty of lower monthly payments. Just make sure you consult a mortgage broker to get the best deal based on your lock-in period, loan terms, and financial goals.
