Already at 3-year lows, will Singapore’s home loan rates keep falling in 2026?

LOCAL FACTORS AND FED SIGNALS

DBS senior rates strategist Eugene Leow noted that local interest rates began declining well before the Fed’s cuts in September, due to high domestic liquidity and safe haven flows linked to investors reacting to US President Donald Trump’s “Liberation Day” tariffs.

Banks have also trimmed the spread – or margin – typically added to floating rate loans, from about 0.7 per cent to 0.25 per cent, said Mr Chia.

Looking ahead to 2026, the Fed’s latest policy signals suggest only a marginal easing path. New projections indicate just one-quarter percentage-point cut next year, and Fed chair Jerome Powell has said rate hikes are unlikely.

“The message was clear: the era of pre-emptive easing is over,” said Mr Daniel Siluk, a portfolio manager at Janus Henderson Investors, adding that the Fed’s shift to a meeting-by-meeting approach has set “a high bar for further cuts”.

The US central bank enters 2026 in a “wait-and-see” mode, with a new chair expected to be announced soon as Mr Powell’s term ends in May. Mr Trump has hinted at appointing White House economic adviser Kevin Hassett, who is seen as favouring further cuts.

Mortgage analysts said Singapore home loan rates will continue to follow the Fed’s moves, but large declines are unlikely after the significant adjustments this year.

DBS’ Mr Leow said SORA may have already “found a floor”. Mr Darren Goh, executive director of MortgageWise.sg, agreed that current rates likely reflect most of the expected US easing – barring an extraordinary economic shock such as a deep labour market slump.

Nevertheless, banks are expected to continue offering competitive packages, including legal subsidies and cash rebates. This is especially so in the first quarter of the year when competition for market share intensifies, said Mr Chia.