Home Price or Interest Rate: Which Should You Prioritise When Buying Property?

You’ve found a home you love. The price seems reasonable. But then you check the loan package—and the home loan interest rate looks higher than you expected. Do you wait for a better deal on financing, or do you risk losing the property to someone else?

For most buyers in Singapore, it’s the same dilemma: should you prioritise a lower property price or a low interest rate mortgage? While both affect how much you pay over time, they each influence affordability in very different ways. Understanding their individual impact can make or break your buying strategy in 2025.

Why This Debate Matters More in 2025

With property prices in Singapore still at record levels and home buying interest rates gradually softening, the question of what matters more—price or rate—has become increasingly relevant.

The reality? There’s no one-size-fits-all answer. Instead, buyers must weigh short-term affordability against long-term cost.

Wondering whether mortgage rates or home prices matter more? Discover which affects long-term costs, how to plan your home purchase, and why interest rates may outweigh price.

Property Price: The Barrier to Entry

The home price is what you see first—and for many, it’s the scariest number. But it’s more than just the sticker tag.

When property prices are high:

• You need a larger down payment. In Singapore, this is at least 25% for private homes, and 20% for HDBs under an HDB loan.

• You may breach your Total Debt Servicing Ratio (TDSR), which caps your monthly loan obligations at 55% of your gross income.

• If you’re buying a second property or you’re older, your Loan-to-Value (LTV) ratio may drop, demanding even more upfront cash.

  
  

Put simply, a high property price raises the hurdle to buy—regardless of how attractive the mortgage loan interest rate may be.

A lower-priced home, on the other hand, means:

• A more manageable down payment

• Greater flexibility for renovations or emergency savings

• Better odds of staying within loan eligibility rules

  
  

But it also means you may have to compromise on location, space, or property age. The trade-off? Entry becomes easier, but what you get may not be exactly what you want.

Interest Rates: The Silent Killer of Long-Term Cost

While home price hits you upfront, the interest rate mortgage hits you over time. In fact, many buyers underestimate how much the mortgage loan interest rate shapes the total cost of owning a home.

For example, on a $1 million loan:

• At 2.5% over 30 years, you pay roughly $400,000 in interest.

• At 3.5%, that shoots up to around $600,000.

  
  

That’s a $200,000 difference—just because of a 1% shift in rates.

A low interest rate mortgage means:

• Smaller monthly repayments

• More room in your monthly budget

• Potential savings of six figures across the loan tenure

The downside? Rates are unpredictable. Most Singapore loans are tied to the Singapore Overnight Rate Average (SORA), which rises and falls with global economic conditions. If you lock in a bad rate—or wait too long for a better one—you could end up paying more or missing out on your ideal home.

Why Property Prices and Interest Rates Don’t Always Sync

There’s a myth that when house mortgage interest rates go up, property prices must fall—and vice versa. But Singapore’s market doesn’t always play by these rules.

Unlike other global cities, Singapore’s housing market is shaped by policy and planning. The government controls land sales, imposes cooling measures, and manages supply through the BTO and GLS programmes. That means prices stay sticky—even when mortgage loan interest rates climb.

From 2022 to 2024, for example:

• Interest rates climbed from 1.5% to over 3.5%.

• Yet home prices continued to rise, with condo and HDB prices hitting new highs.

So while economic theory suggests an inverse relationship, real-world data shows both rates and prices can rise together. That makes your buying decision more complex—and more important to time right.

Which Has a Bigger Impact Over Time? Let’s Do the Math

Here’s the breakdown.

Let’s say you’re choosing between:

• A cheaper property at $800,000 with a 4.75% home purchase interest rate

• A more expensive property at $1 million with a 3.25% home loan interest rate

On paper, the higher-priced home looks riskier. But when you factor in borrowing cost, the second option might actually be cheaper over 30 years. That’s because the lower rate offsets the extra capital—and you may get a better location or newer property in the deal.

However, if the rate drops later and you’ve already bought at a high rate, refinancing might help—but only if your loan has flexibility.

What Buyers Often Forget: The Down Payment Dilemma

In Singapore, your down payment is a serious gatekeeper. Even if your monthly loan fits within TDSR limits, you still need tens (or hundreds) of thousands in cash and CPF to lock in a deal.

For first-time buyers:

• A lower property price can make or break your ability to buy now.

• A low interest rate mortgage sounds great, but means nothing if you can’t meet the upfront cost.

  
  

That’s why many new buyers accept higher home interest rates—as long as it helps them get a foot in the door. They bank on refinancing later when rates drop.

It’s a strategic gamble, but often a practical one.

Affordability Isn’t Just About the Monthly Repayment

When buyers talk affordability, they usually talk instalments. But what about:

• Flexibility to refinance?

• Opportunity cost of locking too much cash in property?

• Your ability to absorb rate hikes in the future?

A high-priced home with a low rate can leave you overexposed. A cheaper home with a higher rate might let you sleep better at night, knowing you’re not overcommitted.

Short-Term Pain vs Long-Term Cost

In an ideal world, you’d get a low property price and a low interest rate mortgage. But in reality, you’ll likely have to choose. Here’s how to weigh your options:

• Are you stretched on cash? Prioritise price. You need to afford the down payment and fees.

• Are you planning to hold the property long-term? Prioritise rate. It will define your total repayment.

• Are you expecting your income to rise? A higher rate now may be manageable—if you refinance later.

• Are you risk-averse? Choose a rate that gives you peace of mind—even if it means paying more upfront.

  
  

The Local Landscape: Why Singapore Is Unique

Singapore isn’t like other markets. Government control means:

• Land supply is limited, keeping prices resilient.

• Cooling measures prevent overheating, but don’t crash prices.

• Most loans are structured with tight lock-ins and refinancing conditions.

That’s why trying to “time the market” perfectly is often futile. You’re better off focusing on what’s right for your current situation.

For example:

• If you’re a first-timer with limited cash, buy a smaller home at today’s price, even if the home buying interest rates are a bit high.

• If you’re an upgrader with equity and cash, focus on getting the best interest rate mortgage and lock in long-term savings.

  
  

Real Buyer Advice: What to Prioritise in 2025

With both prices and rates in flux, here’s how to think about your purchase this year:

1. First-Time Buyers

• Don’t stretch to buy your “forever” home. Buy what you can afford now.

• Prioritise a lower property price to minimise upfront costs.

• Look for loans with short lock-in periods so you can refinance later if rates drop.

2. HDB Upgraders

• Use proceeds from your flat to absorb higher down payments.

• Focus on securing a better mortgage loan interest rate to reduce monthly strain.

• Remember: your monthly cash flow matters more than just total loan size.

3. Investors

• Rental yields must beat your borrowing cost. If rates stay above 3.5%, yields of 4% or more are a must.

• A lower rate helps improve your cash-on-cash return, even on a more expensive unit.

Final Word: Balance Is Key

There’s no perfect answer to whether the house mortgage interest rates or the property price matters more. Both shape your financial outcome—but in different ways.

The trick is balance.

So take a hard look at your finances, your goals, and your time horizon. Speak to a mortgage advisor. Run the numbers, not just the emotions.

Because the best deal isn’t the one with the lowest rate or price—it’s the one that lets you buy confidently, sleep soundly, and hold your ground no matter how the market shifts.