HDB Loan Interest Rate Trends Analysis: What You Need to Know in 2026
HDB loan interest rates have remained stable at 2.6% per annum for over a decade, but the broader mortgage landscape in Singapore has shifted dramatically.[1][2] As of January 2026, bank loan rates have fallen to historic lows between 1.4% and 1.8%, creating a significant gap that's prompting thousands of HDB flat owners to refinance or switch their financing.[1] Understanding these trends is critical if you're considering upgrading from HDB to private property, refinancing your current loan, or simply want to optimize your monthly mortgage payments.
This cluster article examines the current HDB loan interest rate environment, compares it with bank financing options, and provides actionable insights to help you make informed decisions about your property financing strategy.
The Current HDB Loan Interest Rate Environment
The HDB concessionary housing loan rate is pegged at CPF Ordinary Account (OA) interest rate plus 0.1%.[1][2] Currently, this translates to 2.6% per annum, which has been the rate since at least early 2025.[1][4] While this rate provides stability and predictability—a major advantage for budget planning—it no longer represents the most competitive option available to borrowers.
The stability of HDB rates stems from their direct linkage to CPF OA rates, which move slowly and deliberately.[2] However, this same mechanism means HDB rates don't benefit from rapid market downturns like bank rates do. Over the past decade, bank mortgage rates have consistently hovered under 2%, and this trend has accelerated dramatically in 2025.[2]
Understanding the SORA-Driven Rate Decline
The sharp decline in bank mortgage rates throughout 2025 stems directly from movements in the Singapore Overnight Rate Average (SORA), which serves as the benchmark for most floating-rate mortgages.[1] SORA fell from 3% in early January 2025 to just 1.2% by mid-December, marking its lowest level since August 2022.[1] This decline reflects expectations for lower US Federal Reserve rates, which Singapore's banking system closely follows.[1]
Most Singapore banks offer home loans pegged to 3-Month Compounded SORA plus a spread (typically 0.25% to 1.0% depending on loan size and your creditworthiness).[1][5] As SORA has declined, so have monthly mortgage payments for borrowers on floating-rate packages. The chart below illustrates recent SORA trends and how they've influenced mortgage rates:
This dramatic shift has created unprecedented refinancing opportunities. According to OCBC Bank, a homeowner with a S$500,000 HDB loan could save up to S$4,100 in annual interest by switching to a five-year fixed-rate bank package.[1] For borrowers with larger loan amounts, savings can be substantially higher.
Fixed-Rate vs Floating-Rate Bank Mortgages: Which Suits Your Situation?
Bank loan packages come in two primary types, each with distinct advantages and considerations:
Fixed-Rate Packages lock in a single interest rate for a defined period (typically 2-5 years).[1][2] At the start of 2025, fixed rates were around 3.1%, but have since declined to between 1.4% and 1.8%.[1] Major banks now offer competitive fixed rates: DBS offers 3-year fixed at 1.78%, OCBC provides 2-year fixed at 1.60%, and POSB (DBS subsidiary) offers 3-year fixed at 1.55% with no penalty for early repayment or sale during the lock-in period.[1][5][6]
Fixed-rate mortgages provide budget certainty and protect you from rate increases. However, if rates fall further, you're locked into a higher rate unless you refinance (which incurs legal and valuation fees).[1] The current low-rate environment makes fixed packages attractive for borrowers who value predictability.
Floating-Rate Packages are pegged to SORA and adjust monthly as the benchmark moves.[1][2] These typically offer lower initial rates (currently 1M SORA + 0.25% to 0.80% spread), but your monthly payment fluctuates with market conditions.[1][5] Floating rates benefit you when benchmark rates fall but expose you to payment increases if rates rise.
Your choice depends on your risk tolerance, financial flexibility, and economic outlook. Conservative borrowers prefer fixed rates for predictability, while those comfortable with payment variability may choose floating rates to capitalize on current low-rate conditions.
The HDB-to-Bank Switch: Why Thousands Are Making the Move
The interest rate gap between HDB loans (2.6%) and bank mortgages (1.4%-1.8%) has triggered a dramatic shift in borrowing patterns. At OCBC Bank, the number of homeowners switching from HDB loans to bank financing grew seven times in the first 11 months of 2025.[1] DBS's POSB HDB loan saw take-up rates increase by 13 times in October-November compared to early 2025.[1]
This trend reflects rational financial decision-making: a homeowner with a S$500,000 HDB loan at 2.6% paying approximately S$1,373 monthly would reduce this to roughly S$1,033 monthly with a 1.55% bank rate—a saving of S$340 per month or S$4,080 annually.[1][5] Over a 25-year mortgage, this compounds to substantial lifetime savings.
However, switching from HDB to bank financing carries important considerations. Once you refinance to a bank loan, you cannot return to HDB financing in the future.[1] Additionally, you'll face refinancing costs including legal fees, valuation charges, and administrative expenses (typically S$1,500-S$3,000 total).[1] Most mortgage advisers recommend switching only when your current HDB lock-in period ends to avoid early repayment penalties.[1]
Refinancing vs Repricing: Understanding Your Options
Two distinct strategies allow you to capitalize on lower rates:
Repricing involves switching to a different loan package with your current bank after your lock-in period expires.[1] This typically involves minimal fees (just administrative charges) and takes days to process. For example, one DBS borrower repriced from a 3% rate to 1.6% fixed, saving approximately S$500 monthly.[1] Repricing is ideal if you're satisfied with your current bank's service and want to minimize transaction costs.
Refinancing means switching to a completely different bank for a new loan.[1] While this incurs legal and valuation fees, it allows you to shop for the absolute best rate across Singapore's entire banking market. The savings often justify these costs—a S$500,000 loan refinanced at 1.55% instead of 2.6% saves S$4,250 annually, typically recovering refinancing costs within 4-6 months.[1]
To optimize your decision, track when your current lock-in period ends. Repricing with your existing bank is straightforward, but comparing rates across multiple banks ensures you're getting the best deal. Homejourney's bank rates comparison page lets you compare current rates from DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, and other major lenders in real-time, helping you identify the best refinancing opportunity.
HDB Loan Interest Rate Trends: Historical Context and Future Outlook
HDB loan rates have demonstrated remarkable stability, remaining at 2.6% for over a decade despite significant economic changes.[2] This stability reflects the government's policy of providing affordable housing through predictable financing terms. The CPF OA rate, to which HDB rates are pegged, moves conservatively and only adjusts when broader economic conditions warrant change.
In contrast, bank mortgage rates have shown substantial volatility, particularly in response to US Federal Reserve policy shifts.[1] The 2025 rate decline from 3.1% to 1.4%-1.8% demonstrates how quickly bank rates can move when economic conditions change. Looking ahead, mortgage advisers suggest monitoring US interest rate expectations and Singapore's economic outlook, as these directly influence bank lending rates.[1]
For HDB upgraders—those selling their flat to purchase private property—understanding these rate trends is crucial. The financing gap between HDB and bank loans means your upgrade costs less than they did even six months ago. If you're considering the HDB-to-private-property transition, current rate conditions are favorable. Our guide on selling HDB and buying private property provides comprehensive guidance on this major financial decision.
