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Rates will go up and down depending on market conditions, which includes factors such as interest rates in the US, economic conditions and property market etc. As many have already pointed out, banks need to make money. They will set interest rates to their advantage, i.e. they will set fixed loan rates only after they have done a careful study of what they anticipate the interest rate will be in 2 or 3 years' time. The pros and cons of the 3 options are these: Fixed rate Pros: You know exactly what you'll be paying for the next 2 or 3 years. If you are very confident that rates will be going up in the future, then this is what you would go for. But would you really have a better picture of the where interest rates are headed than the banks? Cons: Higher interest rates Floating rate Pros: Lower rates than fixed rate loans. Less susceptible to sudden fluctuations which can happen for SIBOR/SOR pegged loans. Cons: Rates fluctuate and are determined by the banks to their advantage SIBOR/SOR pegged loans Pros: The rates represent the general interest rates that banks themselves are subjected to, this is the so called transparency. Shorter term loans (e.g. 3 months) almost always have lower rates than longer term loans (e.g. 2 years), so when you're pegged to a 3 months SIBOR or SOR rate you may have some leeway before you lose out to a fixed or floating loan rate. Loans are repriced every 3 months if you choose the 3 months rate pegging, so during every repricing you have a good chance of coming off happy that you got lower interest rates Cons: Daily fluctuating rates could mean that if there is a sudden increase in interest rates you'll be caught almost immediately (the next time your repricing next takes place) Check out these charts to have a feel of how SIBOR and SOR rates have been moving. Note that banks typically charge 0.65%- 1% on top of these rates http://www.yenkai.net/content/sibor http://www.yenkai.net/content/daily-sor