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SORA Rate Drops Down to 2.08% – How Does This Impact Homebuyers and Sellers in Singapore?

Ohmyhome

April 2, 2025

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Last Updated on April 3, 2025 by Maelyn Lagman

Will mortgage rates in Singapore drop soon? On March 13, the Singapore Overnight Rate Average (SORA rate) dropped to 2.08%, the lowest it’s been since 2022. Just six months ago, mortgage rates were at 2.85%. They were hovering at around 4% for nearly three years before that.

What is SORA?
Why did the SORA rate drop?
How does a lower SORA rate impact home buyers?
- 1) You may benefit from lower interest costs or refinancing opportunities, especially if your lock-in period* has ended.
- 2) As SORA is a floating rate that reflects market conditions, it can rise again, potentially pushing up borrowing costs over time.
How does a lower SORA rate impact home sellers?
What to look out for in the coming weeks or months
Should you buy or sell your property now?

What is SORA?

SORA is the benchmark interest rate used in Singapore to price floating-rate home loans. It reflects the average cost of overnight borrowing between banks, based on actual transactions.

Replacing older benchmarks like SIBOR or SOR, SORA is considered to be more transparent and less prone to manipulation, as it’s based on real market data.

The SORA rate previously sat just below 1% before it began rising significantly in 2022, when it became the primary benchmark for bank interest rates (Graph 1).

Graph 1 – Rates from 2007 to 2024. | Source: HousingLoanSG

Since then, it remained relatively stable at around 3.6% until it started declining in January 2024. Now, the rate is steadily dropping and is trending back toward its pre-2022 levels.

Graph 2 shows a clear visual of how rapidly the rate has fallen over the past six months to its current position.

Graph 2 – Rates from 2024 to 2025. | Source: HousingLoanSG

Why did the SORA rate drop?

In simple terms, there’s a lot more money in the system right now, and fewer people are borrowing. Let’s break that down.

1. High liquidity

People are saving more or putting money into fixed deposits.
When banks have more cash than they need, they’re less likely to borrow from each other overnight — which is what SORA measures.
Less borrowing = lower demand for overnight cash = SORA goes down.

2. Lower loan demand

Fewer people or businesses are taking loans, possibly due to global economic uncertainty or cautious spending.
So banks don’t need to borrow from other banks overnight to fund those loans.
Again, less borrowing = lower SORA.

3. Strong Singapore dollar

The Singapore dollar has been performing better than other Asian countries.
A strong SGD, amid global economic turmoil, attracts foreign money into Singapore.
This adds even more liquidity to the system and further eases borrowing costs.

Buildings of top banks like DBS, HSBC, Citi

How does a lower SORA rate impact home buyers?

A lower SORA rate results in lower monthly mortgage payments, making homeownership more affordable. However, the impact isn’t immediate — most SORA-pegged loans are based on 1-month, 3-month, or 6-month compounded rates, so changes take effect only when the loan’s interest resets at the end of each term.

There are two ways to look at this:

1) You may benefit from lower interest costs or refinancing opportunities, especially if your lock-in period* has ended.

*A lock-in period (typically 2 to 3 years) restricts switching, refinancing, or full repayment without incurring a penalty of about 1.5% of the outstanding loan. Some floating-rate loans, including certain SORA-pegged ones, may have no lock-in period, depending on the lender. If you’re planning to sell your property, check your loan terms, as some banks waive penalties in such cases.

2) As SORA is a floating rate that reflects market conditions, it can rise again, potentially pushing up borrowing costs over time.

Shifts in interest rates like SORA can also impact the broader property market. When rates are low, more people may be encouraged to buy homes, which often leads to an increase in demand and prices. So while lower rates may help buyers by making loans more affordable, it can also lead some to overstretch their finances.

And if prices rise too quickly, housing becomes less accessible — especially for first-time buyers. So the government may step in with cooling measures to slow things down and keep the market stable.

How does a lower SORA rate impact home sellers?

When SORA rate declines and home loans become more affordable, buyer demand is likely to rise — particularly among those who were previously priced out. This uptick in demand tends to boost competition for available listings, which can drive prices higher. For sellers, this means a more active market and a potentially stronger hand in negotiations.

Lower rates may also accelerate decision-making among buyers eager to lock in attractive loan terms, shortening the time a property sits on the market. Sellers with well-priced or well-located homes could see faster sales and better offers.

However, it’s worth noting that if prices rise too quickly, policymakers may step in with cooling measures, which could temper momentum in the longer term. Timing, therefore, becomes key.

What to look out for in the coming weeks or months

Stabilisation of Interest Rates: If global and local economic conditions remain stable, the SORA rate will likely to hold steady at its current level. That being said, it’s important to monitor rates before rushing into action.

Continued Home Loan Affordability: With the Singapore mortgage rate staying low, buyers should continue to enjoy favorable borrowing conditions until either the SORA rate rises or the government intervenes.

Ongoing Market Activity: Both buyers and sellers should monitor economic indicators and central bank policies, as any shifts could affect future property prices and loan affordability. These markets can fluctuate quickly, and the SORA rate can rise as fast as it drops.

Possible Government Intervention: If housing demand surges too rapidly due to lower interest rates, the government may once again introduce cooling measures to prevent property prices from rising too quickly. This could include tightening loan-to-value (LTV) limits, adjusting Additional Buyer’s Stamp Duty (ABSD), or implementing other regulatory measures to maintain market stability.

The major dip in the SORA rate opens up several great opportunities for people looking to buy or sell homes in 2025. Whether you’re looking to enter the market, upgrade your home, or cash in on rising demand, understanding how interest rates affect your plans is key. That said, rates can change, and policy shifts may follow — so staying informed and timing your move carefully could make all the difference in getting the best deal.