How Is Mortgage Interest Calculated In Singapore & 2026 Trends?

As of early 2026, the mortgage landscape has shifted following global interest rate changes. Bank loan packages have fallen significantly. Meanwhile, HDB concessionary loans remain at 2.6% per annum. At the same time, interest rate expectations suggest borrowing costs may stabilise or bottom out around mid-2026, prompting many homeowners to reassess refinancing opportunities and loan structures.

In this guide, we explain how mortgage interest is calculated in Singapore, the key factors that influence mortgage rates, and the latest market trends shaping home loan costs in 2026 and beyond.

How is Mortgage Interest Calculated in Singapore?

Mortgage interest in Singapore is calculated using the reducing balance method, which forms the basis of loan amortisation for both HDB and bank home loans. Under this structure, interest is charged only on the outstanding loan balance, meaning the amount of interest you pay gradually declines as your principal is repaid.

Since interest-only housing loans were banned in September 2009, borrowers must repay both principal and interest through regular monthly instalments over the loan tenure.

When you take up a mortgage, banks typically provide an amortisation schedule. This schedule outlines how each monthly repayment is divided between two components:

• Interest component – the cost of borrowing the money
• Principal component – the portion that reduces the original loan amount

At the start of the loan, a larger share of each repayment goes toward interest because the outstanding balance is still high. Over time, as the loan balance declines, the interest portion decreases while the principal portion increases.

Banks usually calculate mortgage interest monthly based on the remaining loan balance at the start of the repayment period. This means that each payment gradually reduces the amount of interest charged in subsequent months.

Below is a simplified example of how a $700,000 mortgage with a 30-year tenure at a fixed 4% interest rate may amortise over time:

Month	MI	Int	Prin.	(%)Int/MI
1	$3,341	$2333	$1,008	69.80
2	$3,341	$2,329	$1,011	69.70
3	$3,341	$2,326	$1,015	69.60
–	–	–	–	–
358	$3,341	$33	$3,308	1.70
359	$3,341	$22	$3,319	0.70
360	$3,341	$11	$3,330	0.30

MI = Monthly Instalment | Int = Interest Component | Prin = Principal Component

Key observations from an amortised loan structure:

• Monthly instalments remain constant when the interest rate is fixed.
• The interest share of the instalment is highest in the early years of the loan.
• Over time, a larger portion of each payment goes toward reducing the principal.

Because interest is calculated on a declining outstanding balance, homeowners who make additional repayments earlier in the loan tenure can significantly reduce the total interest paid over the life of the mortgage.

If you are unsure how amortisation affects your monthly instalments or total interest cost, a mortgage advisor can help you review your loan repayment schedule and financing options before committing to a home loan.

What Factors Affect Mortgage Interest Rates in Singapore?

Mortgage rates in Singapore are determined by a combination of borrower-specific factors, loan characteristics, and regulatory requirements. Even small differences in these variables can influence the interest rate offered by banks, which in turn affects your monthly instalment and the total interest paid over the loan tenure.

1. Credit Score

Your credit score is one of the first indicators banks review when assessing a mortgage application. It reflects your repayment history, outstanding credit balances, and previous credit enquiries.

A stronger credit profile signals lower lending risk, which can improve your chances of securing a more favourable interest rate. Borrowers with late payments, high credit utilisation, or unresolved credit issues may face higher loan pricing or stricter approval conditions.

💡 2026 Tip: Before applying for a mortgage, obtain your credit report from the Credit Bureau Singapore (CBS) and address any discrepancies early. Even small issues on your report can influence loan approval or pricing.

2. Property Price and Loan Amount

The size of the mortgage relative to the property value also affects loan pricing. Banks generally prefer larger loan amounts within acceptable loan-to-value limits, as these loans generate higher interest income while spreading administrative costs across a bigger facility.

Smaller loans or properties with unusual valuations may sometimes attract slightly higher rates.

💡 2026 Tip: As lending competition increases in a stabilising interest-rate environment, banks may offer more attractive packages for larger loans or borrowers refinancing existing mortgages.

3. Loan Tenure

The length of the mortgage affects the risk profile of the loan. Shorter loan tenures usually involve lower overall risk for the lender, which may translate into more competitive interest rates.

Longer loan tenures, while reducing monthly instalments, generally increase the total interest cost over time because the loan remains outstanding for a longer period.

💡 2026 Tip: Borrowers should balance affordability with long-term interest savings. A slightly shorter tenure can reduce the total cost of borrowing significantly.

4. Interest Rate Type

Mortgage packages in Singapore generally fall into two categories: fixed-rate loans and floating-rate loans.

Fixed-rate mortgages lock in the interest rate for a predetermined period, typically between one and five years, providing predictable monthly repayments during the lock-in period. Floating-rate mortgages, on the other hand, are commonly pegged to SORA (Singapore Overnight Rate Average), meaning the interest rate adjusts periodically as market benchmarks change.

💡 2026 Tip: With bank mortgage packages in early 2026 typically appearing in the 1.3%–1.9% range, some borrowers are comparing shorter fixed periods with SORA-linked floating loans to balance stability and flexibility.

5. Total Debt Servicing Ratio (TDSR)

In Singapore, banks must comply with the TDSR framework when approving home loans. TDSR caps a borrower’s total monthly debt obligations, including the mortgage, at 55% of gross monthly income.

To ensure borrowers remain financially resilient, banks usually assess TDSR using a higher stress-test interest rate, rather than the promotional rate offered in the loan package.

💡 2026 Tip: Even if market mortgage rates decline, your maximum loan eligibility may still depend on the bank’s internal stress-test rate and overall debt profile. Maintaining manageable debt levels can improve loan approval outcomes.

Macro-Economic Factors

Beyond borrower-specific factors, mortgage interest rates in Singapore are also shaped by broader global and domestic economic conditions. These macro-economic forces influence banks’ funding costs, risk appetite, and overall lending activity.

1. Inflation

Inflation is one of the most important drivers of interest rate movements. When inflation rises, central banks often increase interest rates to slow spending and stabilise prices. Higher benchmark rates typically lead to higher borrowing costs, including mortgage rates.

Conversely, when inflation moderates, policymakers may gradually ease monetary policy to support economic activity.

💡 What’s happening in 2026?

Inflation in Singapore has cooled significantly compared to the post-pandemic peak. After rising sharply in 2022–2023, price pressures have moderated as global supply chains stabilised and demand normalised.

Recent forecasts suggest overall inflation is likely to remain within a low-to-moderate range in 2026, helping create a more stable environment for borrowing costs. Lower inflation expectations also reduce the likelihood of aggressive interest rate hikes.

2. Economic Growth

The broader health of the economy also affects mortgage rates. Strong economic growth typically increases demand for credit, which can push lending rates higher. During slower economic periods, central banks may support growth by allowing borrowing costs to ease.

💡 What’s happening in 2026?

Singapore’s economy is expected to grow at a moderate pace of around 2–3%, supported by technology-related demand, manufacturing recovery, and stable domestic consumption. While growth remains resilient, it is not overheating, which supports a relatively balanced interest-rate environment.

Employment levels remain stable, although wage growth has slowed slightly. This combination of steady employment and moderate growth tends to support stable property demand without creating excessive pressure on borrowing costs.

3. US Federal Reserve Monetary Policy

Singapore’s mortgage market is heavily influenced by global interest rate movements, particularly those set by the US Federal Reserve. Because global capital markets are interconnected, changes in US interest rates affect bank funding costs worldwide.

In Singapore, floating mortgage packages are commonly linked to SORA, which often moves in line with global interest rate trends.

💡 What’s happening in 2026?

After an aggressive tightening cycle between 2022 and 2023, the Federal Reserve has shifted toward a more cautious easing phase. By early 2026, the federal funds rate has stabilised around 3.5%–3.75%, with policymakers signalling a gradual and data-dependent approach to any further rate adjustments.

As global borrowing costs ease, Singapore mortgage rates have also softened, contributing to the more competitive loan packages seen across local banks.

4. Bond Market Conditions

Mortgage rates are also influenced by movements in the bond market, particularly government bond yields. When bond yields rise, banks’ cost of funding increases, which can lead to higher mortgage rates. Conversely, declining bond yields can support lower lending rates.

Because bond markets react quickly to inflation expectations and monetary policy signals, they often provide an early indication of future mortgage rate trends.

5. Housing Market Conditions

Finally, supply and demand conditions in Singapore’s housing market also influence lending dynamics. Strong demand for property purchases typically increases mortgage activity, which may affect how aggressively banks price their loan packages.

When property demand slows or refinancing activity increases, banks may introduce more competitive mortgage rates to attract borrowers.

Overall, mortgage rates in Singapore are shaped by a combination of global monetary policy, domestic economic conditions, and financial market trends. Understanding these macro-economic drivers can help borrowers better anticipate potential shifts in the home loan environment.

Are Mortgage Interest Rates Cyclical in Singapore?

Mortgage interest rates tend to move in cycles, reflecting broader economic conditions and monetary policy decisions. In periods of strong economic growth, central banks may raise interest rates to control inflation and prevent the economy from overheating. During economic slowdowns or periods of uncertainty, interest rates are often reduced to stimulate borrowing, investment, and consumption.

This cyclical behaviour affects mortgage rates because banks adjust their lending rates based on their cost of funds, economic outlook, and demand for loans. When benchmark rates decline, borrowing becomes cheaper, encouraging more property purchases and refinancing activity. Conversely, when interest rates rise, mortgage repayments increase, which may slow housing demand.

For banks, the interest charged on mortgages represents a key source of income. Higher lending rates generally translate into stronger margins, while lower rates can compress profitability. However, falling rates can also stimulate loan demand, potentially increasing the volume of mortgages issued and partially offsetting narrower margins.

In the current interest-rate environment, global monetary policy has shifted away from the aggressive tightening seen between 2022 and 2023. As borrowing costs stabilise following earlier rate cuts, mortgage rates in Singapore have gradually eased from their previous highs.

Despite these changes, homebuyers should avoid making long-term property decisions based solely on short-term rate movements. Mortgage cycles can change over time, and understanding how interest rates move across economic cycles can help borrowers better prepare for future shifts in the lending environment.

How Have Mortgage Interest Rates in Singapore Changed Over Time?

Mortgage interest rates in Singapore have shifted significantly over the past two decades, largely reflecting global economic cycles and changes in monetary policy. Understanding these historical trends can help homeowners and investors better appreciate how external shocks and policy decisions influence borrowing costs.

1. Impact of the Global Financial Crisis (2008–2014)

The 2008 Global Financial Crisis triggered one of the most severe economic downturns in modern history. Originating from the collapse of subprime mortgage markets in the United States, the crisis rapidly spread through the global financial system, affecting banks, credit markets, and property sectors worldwide.

Singapore’s open, export-driven economy was particularly vulnerable to global disruptions. As financial markets tightened and economic activity slowed, central banks around the world introduced aggressive monetary easing measures to stabilise the system.

During this period, interest rates fell significantly, allowing mortgage borrowing costs to remain relatively low. However, economic uncertainty and cautious lending practices meant the recovery of credit markets, including mortgage activity, took several years.

2. Economic Recovery and Gradual Rate Increases (2014–2019)

As the global economy recovered, interest rates began to rise gradually. From around 2014 onwards, mortgage rates in Singapore started increasing as global monetary policy normalised.

Between 2016 and 2019, banks adjusted mortgage pricing more frequently in response to rising benchmark rates. During this period, most home loans were still pegged to SIBOR or SOR, which served as key reference benchmarks before the transition to SORA.

By 2018–2019, fixed-rate mortgage packages in Singapore had climbed above the 2% level, reflecting stronger economic conditions and higher global interest rates.

3. The COVID-19 Pandemic (2020–2021)

The global outbreak of COVID-19 in 2020 triggered another major economic shock. Governments and central banks responded with unprecedented stimulus measures to support economic activity and financial stability.

Interest rates were slashed to near-zero levels across many major economies. In Singapore, this translated into very low mortgage rates, with many borrowers securing home loans below 2% interest during the pandemic period.

Lower borrowing costs significantly reduced monthly mortgage repayments and encouraged refinancing activity among homeowners.

4. Post-Pandemic Rate Surge (2022–2024)

As global economies reopened, inflation rose sharply due to supply disruptions, strong consumer demand, and rising energy costs. In response, the US Fed launched an aggressive tightening cycle, raising interest rates 11 times between March 2022 and July 2023.

This shift had a direct impact on Singapore’s mortgage market. By this time, the industry had transitioned to SORA as the primary benchmark for floating-rate home loans. 

During the tightening cycle:

• 3-month compounded SORA rose from around 0.19% in early 2022 to about 3.63% by mid-2024.
• Fixed mortgage rates in Singapore climbed above 4%, the highest levels seen in more than a decade.
• Higher borrowing costs slowed mortgage demand and reduced refinancing activity.

5. Interest Rate Reversal (2024–2025)

Toward the end of 2023 and into 2024, inflation pressures began to moderate globally. Central banks gradually shifted away from aggressive tightening, and the US Federal Reserve started easing monetary policy.

Between September and December 2024, the Fed implemented three rate cuts, bringing the federal funds rate down to approximately 4.25%–4.50%. Singapore’s mortgage benchmarks followed this trend. As global funding costs eased, SORA rates began to decline, and mortgage packages gradually became more competitive again.

By 2025, borrowing costs had started to stabilise, allowing homeowners and prospective buyers to reassess financing options after the sharp increases seen during the earlier tightening cycle.

What Will Mortgage Rates in Singapore Be Like in 2026 and Beyond?

Mortgage rates in Singapore have gradually eased from the highs seen during the global rate-hiking cycle of 2022–2023. By early 2026, most bank mortgage packages – particularly short-term fixed and SORA-linked floating loans – are generally appearing in the ~1.3% to 1.9% range, depending on the loan structure and promotional packages offered by banks.

This reflects a much more moderate interest-rate environment compared to the sharp increases experienced earlier in the decade.

This shift is closely tied to global monetary policy developments. After aggressive tightening to control inflation, major central banks have moved toward a more cautious and data-dependent approach to interest rate adjustments. As global borrowing costs stabilise, banks in Singapore have also adjusted their mortgage packages accordingly.

At the same time, Singapore’s benchmark for floating-rate mortgages i.e. the SORA has begun to moderate following its earlier peak. As global funding pressures ease, SORA-linked mortgage packages have become more competitive, prompting renewed interest among homeowners evaluating refinancing opportunities.

Looking ahead, analysts expect Singapore interest rates to bottom out around the first half of 2026, before stabilising in the medium term. While borrowing costs are unlikely to return to the ultra-low levels seen during the pandemic, the current environment suggests a more balanced interest rate cycle.

For prospective homebuyers and existing homeowners, this means mortgage planning may increasingly focus on loan structure and flexibility rather than simply chasing the lowest available rate. Decisions such as choosing between fixed, floating, or hybrid packages – and selecting appropriate lock-in periods – can play a significant role in managing long-term financing costs.

Ultimately, the outlook for mortgage rates in Singapore suggests a period of relative stability with moderate borrowing costs, providing opportunities for both property buyers and homeowners reviewing their existing loan arrangements.

Is 2026 a Good Time to Buy Property in Singapore?

Whether 2026 is a good time to buy property in Singapore depends less on trying to time the market perfectly and more on your financial readiness, loan affordability, and holding horizon.

The market entering 2026 looks more balanced than in the sharp run-up years. On the private side, prices of private residential properties rose 3.3% for the whole of 2025, moderating from 3.9% in 2024. At the same time, private residential rentals rose 1.9% in 2025, while quarterly rental growth softened at the end of the year.

For HDB buyers, resale prices were still firm in 2025, although price growth had already begun to moderate by mid-2025. HDB reported that resale prices rose 0.9% quarter-on-quarter in Q2 2025, slower than the 1.6% increase in Q1 2025, marking a third straight quarter of moderation.

Looking into 2026, supply conditions may become more supportive for buyers in some segments. Analysts expect an influx of flats reaching Minimum Occupation Period (MOP) in 2026, which could help moderate HDB resale price pressures, while higher housing supply is also expected to keep rental growth more contained.

From a financing perspective, 2026 is more favourable than the peak-rate period because borrowing costs have eased meaningfully from earlier highs. That improves affordability, but buyers should still stress-test repayments rather than assume rates will stay low indefinitely.

In practice, 2026 may be a good time to buy if:

• your income is stable and your debt load is manageable
• you have sufficient cash or CPF for downpayment and fees
• you plan to hold the property for several years rather than speculate on short-term price movements

So, the better question is not “Is 2026 the perfect time?” but “Does the property and loan structure make sense for my finances today?”

Is 2026 a Good Time to Refinance Your Mortgage in Singapore?

For many homeowners, 2026 is still a favourable period to review refinancing, but the case is now more selective than it was when rates first started falling.

Singapore mortgage rates are already well below the peak levels seen in the earlier tightening cycle, and refinancing momentum picked up strongly as rates fell below 3 per cent. Banks were offering home loan packages in the ~1.3% to 1.9% range as refinancing demand accelerated, especially among borrowers exiting older floating-rate packages.

By late 2025, market commentary suggested that the bulk of the rate decline had already occurred, although lower borrowing costs were still expected to support refinancing activity into 2026. At the same time, advisers also noted that refinancing may moderate from mid-2026 as many borrowers who took loans in 2023 and 2024 had already refinanced out of 3%–4% packages.

That means refinancing in 2026 makes the most sense if:

• your current loan is still materially above prevailing market rates
• you are near or past the end of your lock-in period
• the savings after legal fees, valuation costs, and any clawbacks are still meaningful
• the new package better fits your holding period and cash-flow needs

You should also assess whether you want repayment certainty or future flexibility. A fixed-rate package may suit borrowers who want predictable instalments, while a floating package may suit those who expect to review their loan again once rates stabilise.

In short, 2026 can still be a good time to refinance but only if the all-in savings and structure justify the switch.

Final Thoughts: My Take as a Mortgage Advisor

Buying a property in Singapore is rarely just about today’s interest rates. In my experience advising homeowners, the real financial impact of a mortgage depends on how well your loan structure fits your long-term plans, not simply whether you secured the lowest rate available at a particular moment.

Mortgage rates will always move through cycles, influenced by global interest rates, economic conditions, and changes in the property market. What matters more is whether your home loan remains manageable and flexible enough to adapt as those conditions evolve over the years.

This is why I encourage homeowners and property buyers to look beyond headline rates and think about the bigger financial picture – your loan tenure, refinancing flexibility, cash flow stability, and future property plans.

At DollarBack Mortgage, we take a comprehensive approach when advising homeowners. Instead of focusing only on the current rates offered by banks, we help clients evaluate mortgage options with a forward-looking perspective of at least three years, comparing loan structures across multiple banks to identify solutions that support long-term savings.

You can connect with a DollarBack Mortgage consultant to navigate through the complexities of the mortgage market with ease and confidence. We help homeowners find the best home loan in Singapore across all major banks and compare mortgage rates.