Three-month SORA declines again, global situation's impact on interest rates remains unclear | Lianhe Zaobao

The benchmark interest rate for local housing loans, namely the three-month Singapore Overnight Rate Average (SORA), continues to decline. Data released by the Monetary Authority of Singapore on Friday (March 6) shows that the rate has dropped to 1.1160%, the lowest since July 2022. Since the beginning of 2025, the three-month SORA has cumulatively fallen by more than 190 basis points. Economists point out that in just over two months this year, the global environment has undergone drastic changes. New tariffs and the evolution of the situation in the Middle East may affect our economy and interest rate trends, but the specific impacts are difficult to predict. Analysts have differing views on the interest rate trends for this year. Zhang Shuxian, head of exchange rate and interest rate strategy at OCBC Bank, said in an interview with Lianhe Zaobao that in the short term, due to ample Singapore dollar liquidity, SORA may continue to remain low. She pointed out that the duration and scope of the US-Iran conflict are uncertain, and the impact on short-term interest rates remains unclear. On one hand, Singapore dollar assets may attract safe-haven funds, thereby lowering interest rates; on the other hand, rising oil prices may push up inflation expectations, leading to higher interest rates. In the medium term, she believes that Singapore dollar interest rates will not deviate too much from economic fundamentals. OCBC Bank's research department expects the country's economy to grow by about 3% for the year, with an inflation rate of about 1.3%. Zhang Shuxian stated that in such a macro environment, if short-term interest rates (typically referring to rates within one year) fall below 1.5%, it may appear overly accommodative. Therefore, she expects short-term interest rates to eventually return to a normal level of around 1.5%, although the time required may be longer, with expectations that it will only be reached by the end of this year. UOB's latest report points out that despite uncertainties brought about by new tariffs and other factors, local interest rates are limited in their impact due to resilient macroeconomic support. Since the announcement of tariffs, SORA has remained within the range of 0.8% to 1.4%, with the moving average staying above the psychological threshold of 1%. The report states: "If current events do not trigger a large-scale inflow of safe-haven funds similar to 2025, the spread between SORA and the Secured Overnight Financing Rate (SOFR) will continue to normalize this year, thereby driving SORA to rise moderately." Further Reading SREIT's current round of financial reports is stable, but stock price returns have been under pressure this year Three-month SORA drops to 1.1384%, hitting a new low in over a year United Overseas Bank predicts that the three-month SORA will rise to 1.26% in the second quarter, and then to 1.30%, 1.37%, and 1.48% in the following three quarters. Malayan Banking Berhad economist Cai Xue Min holds a different view. He believes that due to the inflow of safe-haven funds and the impact of the Federal Reserve's loose policy, the three-month SORA may continue to decline this year, potentially dropping to 0.7% by the end of the year. He added that the Monetary Authority of Singapore may tighten monetary policy in April, slightly increasing the appreciation of the Singapore dollar, which could also exert downward pressure on short-term interest rates. Mortgage Rates Diverge, Longer-Term Fixed Rates Increase Against the backdrop of differing expectations for SORA, recent trends in mortgage rates have shown divergence. Floating rates, as well as one-year and two-year fixed rates, continue to decline, while some financial institutions have begun to raise three-year and five-year fixed rates. Lu Chengguang, the operations director of the mortgage comparison website Mortgage Master, stated in an interview that banks are likely making this adjustment to address the long-term commitment risks amid current global economic uncertainties. According to the data he provided, as of now, the lowest floating rate for SORA mortgages in the market is 1.03%; the lowest one-year, two-year, three-year, and five-year fixed rates are 1.30%, 1.35%, 1.50%, and 1.88%, respectively. As for whether low rates will continue to stimulate housing demand, he mentioned that overall home-buying demand has stabilized. While lower mortgage rates are an important factor, they are not the only or decisive factor. Regarding loan plan selection, he pointed out that the lowest rate option may not necessarily be the most suitable for homebuyers. Homebuyers should avoid trying to "time" the market or blindly pursue the lowest rate, while also considering various non-interest factors, such as the lock-in period and penalties for default, whether it is possible to switch to a new plan for free during the lock-in period, and whether partial or full early repayment is allowed