HDB Loan Interest Rate Trends Analysis: What You Need to Know in 2026
The HDB concessionary loan interest rate remains fixed at 2.6% per annum, but this stability masks a dramatic shift in Singapore's home loan landscape[1][2]. As of January 2026, bank loan rates have dropped significantly below the HDB rate, with three-year fixed packages now available at approximately 1.55% to 1.7%, creating a critical decision point for HDB flat owners and first-time buyers[1][4][5]. Understanding these HDB loan interest rate trends is essential for making informed financing decisions that could save you thousands of dollars over your loan term.
This analysis examines current interest rate movements, compares HDB loans with bank financing options, and provides actionable insights to help you determine which borrowing option aligns with your financial goals. Whether you're a first-time buyer, an existing HDB owner considering refinancing, or an investor evaluating your options, Homejourney's comprehensive breakdown will guide you through this critical decision.
Understanding HDB Concessionary Loan Rates
The HDB concessionary loan is a housing loan offered directly by Singapore's Housing Development Board. The interest rate is pegged at 0.1% above the CPF Ordinary Account (OA) interest rate, which currently stands at 2.5%, resulting in the 2.6% rate[2][7]. This structure means the HDB loan rate is not truly fixed—it adjusts whenever the CPF OA rate changes. However, this has occurred only once in nearly 20 years, making it effectively stable and highly predictable[4].
The HDB loan offers several distinctive features that appeal to conservative borrowers[2]:
- Floating rate pegged to CPF OA + 0.1% (currently 2.6%)
- Loan-to-Value (LTV) limit of up to 90% of property value
- Stable, predictable monthly payments
- Direct lending from HDB with straightforward terms
- No early repayment penalties
However, once you switch from an HDB loan to a bank loan, you cannot return to HDB financing in the future[1][4]. This irreversible decision is crucial to understand before refinancing.
The Bank Loan Alternative: Current Rates and Trends
Bank loan rates for HDB properties have become significantly more attractive than the HDB concessionary rate. As of January 2026, major banks are offering three-year fixed-rate packages between 1.55% and 1.7%, representing savings of approximately 0.9% to 1.05% compared to the HDB rate[1][4][5].
For a S$350,000 loan, this rate difference translates to approximately S$3,500 in first-year savings[4]. On a S$400,000 loan, refinancing from HDB to a bank loan could save around S$3,600 in the first year alone[5].
Banks are actively competing for HDB refinancing business, offering various loan structures[1][5]:
- Fixed-rate packages: Locked rates for 2-3 years (currently 1.45%-1.7%), with no early repayment penalties
- Floating-rate packages: Pegged to 3-Month Compounded SORA, currently at approximately 1.34%-1.4%
- Cash rebates: Many banks offering incentives for refinancing
- Flexible conversion: Options to switch from fixed to floating rates after lock-in periods
The chart below shows recent interest rate trends in Singapore to help you understand how rates have evolved:
SORA: The Benchmark Driving Bank Loan Rates
Most bank loan packages in Singapore are now pegged to SORA (Singapore Overnight Rate Average), replacing the older SIBOR benchmark. The three-month compounded SORA has dropped to approximately 1.34% per annum as of late 2025—the lowest level in over three years[5].
Understanding SORA is critical because it directly affects your monthly mortgage payments if you choose a floating-rate package. Here's what you need to know[5]:
- Current 3M SORA: Approximately 1.34% per annum
- Bank spreads: Typically 0.6% to 1.0% above SORA
- Total floating rate: SORA + bank spread = approximately 1.94% to 2.34%
- Trend: SORA has fallen significantly from 3.6%+ in 2023
The decline in SORA reflects broader economic conditions, including lower inflation and potential further cuts by the US Federal Reserve[5]. However, experts predict that the bulk of rate declines have already occurred, with future movements likely to be modest[5].
Fixed vs. Floating Rate Loans: Which Should You Choose?
The decision between fixed and floating rates depends on your risk tolerance, financial situation, and economic outlook. Here's a practical comparison:
| Factor | Fixed-Rate Loan | Floating-Rate Loan |
|---|---|---|
| Current Rate | 1.55%-1.7% (3-year lock) | 1.34%-1.4% (SORA-based) |
| Monthly Payment | Stable and predictable | Varies with SORA movements |
| Best For | Risk-averse borrowers; budget certainty | Rate-sensitive borrowers; expect falling rates |
| Upside Risk | Locked in if rates fall further | Payments increase if SORA rises |
| Downside Risk | None during lock-in period | Payments decrease if SORA falls |
| Flexibility | Some banks offer conversion after year 1 | Typically more flexible terms |
Why HDB Owners Are Refinancing Now
Since early 2025, there has been a significant surge in HDB flat owners switching to bank loans[5]. This trend reflects several factors:
The Rate Gap: The 0.9%-1.05% difference between HDB (2.6%) and bank rates (1.55%-1.7%) is substantial enough to justify the refinancing process[1][4].
Lock-in Expiry: Many owners who took higher fixed-rate bank loans in 2022-2023 (at 3%-4% rates) have now reached the end of their lock-in periods and can refinance at much lower rates[5].
Bank Competition: Banks are actively promoting HDB refinancing with cash rebates, flexible terms, and no early repayment penalties[1][5]. DBS's POSB HDB loan saw take-up rates increase 13 times from the start of 2025 to October-November[1].
Improved Affordability: Lower rates mean lower monthly payments, making homeownership more affordable during uncertain economic times[4][5].
Key Considerations Before Refinancing from HDB to Bank Loans
While the rate savings are attractive, refinancing from an HDB loan to a bank loan is a permanent decision with important implications:
No Return to HDB Financing: Once you refinance to a bank loan, you cannot return to HDB financing in the future, even if rates rise significantly[1][4]. This is the most critical consideration.
Volatility Risk: If you choose a floating-rate package, your payments will fluctuate with SORA movements. While rates are currently low, they could rise if economic conditions change[1].
Different LTV Limits: Bank loans have a maximum LTV of 75% for first properties (compared to 90% for HDB loans), which may affect your borrowing capacity[2].
Application Requirements: Bank loans typically require more documentation and stricter credit assessments than HDB loans[2].
Lock-in Periods: Fixed-rate packages usually have 2-3 year lock-in periods with penalties for early repayment or property sale during this time[1][3].
