A fixed-rate home loan is a bank housing loan whose interest rate is set for an initial period and does not move with market rates during that period, after which the interest becomes variable.
Key takeaways
- The rate is fixed for the first few years and does not change even when market rates fall.
- When the fixed period ends the interest becomes variable, usually pegged to a reference rate such as Compounded SORA or a bank-determined rate.
- The fixed rate is often a promotional rate that is lower than the rate applying for the remainder of the loan.
- Home loan interest is normally computed on monthly rest, so on these packages the advertised rate and the effective interest rate are the same.
- The property loan fact sheet issued before signing states the tenure, lock-in period, rate change illustration, effective interest rate and penalty fees.
What the fixed period covers
During the fixed period the contractual interest rate does not change, so the monthly instalment is known in advance for the whole of that period. The fixed period commonly runs alongside a lock-in period, during which ending or refinancing the loan can trigger penalty fees. Because the rate is held, it does not fall when market rates fall either.
What happens when the fixed period ends
After the fixed period the loan reverts to a variable rate, typically a reference rate plus a margin. Where the fixed rate was a promotional rate, the reverted rate can be materially higher, which is why MoneySense points borrowers to the rate change illustration in the property loan fact sheet before signing. At that point the loan can be repriced with the same bank or refinanced with another.
How the instalment is worked out
Interest on a home loan is charged on monthly rest, meaning it is computed on the outstanding balance rather than on the original amount. Each equal monthly instalment therefore contains a shrinking interest portion and a growing principal portion over the life of the loan.
Key fixed-rate home loan figures
| Item | Figure |
|---|---|
| Rate during the fixed period | unchanged |
| After the fixed period | reverts to a variable rate |
| Interest computation | monthly rest |
| Advance notice of a rate change | usually 30 days |
| EIR on a monthly rest loan | same as the advertised rate |
Figures as at 2026. Source: MoneySense.
Worked example
A SGD 600,000 loan fixed at 3.5% p.a. over 20 years on monthly rest is repaid in 240 equal instalments of SGD 3,480. In year one the split is about SGD 1,730 principal and SGD 1,750 interest each month; by year five it is about SGD 1,989 principal and SGD 1,490 interest, while the instalment itself stays at SGD 3,480.
Related terms
All Singapore glossary terms →Related calculator
Compare the monthly repayment on a fixed-rate package against other rates and tenures.
This page is provided for educational and informational purposes only. It does not constitute financial advice. All figures and worked examples are estimates for illustrative purposes, are subject to change, and do not reflect any individual’s circumstances. Always refer to MoneySense and seek independent professional advice before making any financial decisions.