HDB Loan Interest Rate Trends Analysis: What You Need to Know in 2026
The HDB concessionary loan rate is currently fixed at 2.6%, but this doesn't tell the full story about your mortgage options in 2026. Bank loan rates have dropped significantly lower—ranging from 1.35% to 1.8% depending on the package and bank—creating a historic opportunity for HDB flat owners to refinance and save thousands of dollars annually. Understanding these interest rate trends is crucial for making informed financing decisions, whether you're a first-time buyer, refinancing homeowner, or investor.
This article breaks down the current HDB loan interest rate landscape, explains why rates matter, and shows you how to evaluate your options with Homejourney's trusted comparison tools.
Understanding HDB Loan Interest Rates vs Bank Rates
The HDB concessionary housing loan operates differently from bank mortgages. The HDB rate is technically a floating rate pegged at 0.1% above the CPF Ordinary Account (OA) interest rate, which currently sits at 2.5%, resulting in the 2.6% HDB rate. This rate has remained remarkably stable for over a decade because it's tied to CPF returns rather than market forces.
Bank loan rates, by contrast, fluctuate based on market conditions and are typically pegged to SORA (Singapore Overnight Rate Average) or other benchmark rates. As of January 2026, major banks including DBS, OCBC, UOB, and HSBC are offering three-year fixed rates between 1.55% and 1.8%, with some floating-rate packages starting as low as 1.35%. This represents a significant gap—roughly 0.75% to 1.25% lower than the HDB rate.
To understand these rate movements better, track live SORA rates (3M SORA, 6M SORA) updated daily on Homejourney's bank rates page, where you can compare rates from all major banks side-by-side.
The SORA Factor: Why This Benchmark Matters
SORA (Singapore Overnight Rate Average) has become the primary benchmark for Singapore home loans. Most floating-rate packages are now pegged to the 3-month or 6-month SORA rate rather than older benchmarks like SIBOR. The 3-month SORA has fallen dramatically—from exceeding 3.6% for most of 2023 to approximately 1.34% as of late 2025, marking the lowest level in over three years.
This decline is the primary reason bank loan rates have become so competitive. When SORA is low, banks can offer lower rates to borrowers. The chart below shows recent interest rate trends in Singapore to help you understand how SORA movements have affected overall mortgage rates:
As you can see from the chart, rates have trended downward significantly. Experts predict the 3-month SORA will hover between 1.3% and 1.4% through 2026, assuming the US Federal Reserve continues gradual rate cuts and Singapore's inflation remains controlled. However, as mortgage advisor Sebastian Sieber from Cashew Mortgages notes, "the bulk of the rate decline has already occurred. While further declines are possible, they are likely to be modest."
Fixed vs Floating Rate Packages: Which Is Right for You?
The choice between fixed and floating rates depends on your risk tolerance and market outlook. Here's how they compare:
| Fixed Rate | Floating Rate |
|---|---|
| Current rates: 1.55%–1.8% (3-year fixed) | Current rates: 1M SORA + 0.25% (approximately 1.36%) |
| Monthly payments remain constant throughout lock-in period | Monthly payments fluctuate with SORA movements |
| Protects against rate increases; provides budgeting certainty | Lower initial payments; benefits if rates continue falling |
| Typically includes repricing penalties or early repayment fees | More flexibility; many packages offer free conversion after 12–36 months |
| Best for: Risk-averse borrowers, those on tight budgets, expecting rate increases | Best for: Flexible borrowers, those expecting rates to stay low, planning to refinance |
Many HDB owners who took fixed-rate bank loans at 3–4% in 2022–2023 are now refinancing into floating-rate packages or lower fixed rates as their lock-in periods end. This refinancing wave has been particularly strong since late 2025.
Real Savings: What the Numbers Mean for Your Wallet
The gap between HDB and bank rates translates to substantial monthly savings. DBS Bank calculated that refinancing a S$400,000 HDB loan from the 2.6% HDB rate to their 1.7% fixed POSB HDB loan would save approximately S$3,600 in the first year alone. For a homeowner like Denise Chan (featured in Channel NewsAsia), refinancing from a 3% rate to DBS's 1.6% two-year fixed rate saved her about S$500 monthly.
To calculate your potential savings, use Homejourney's mortgage calculator, which instantly shows your borrowing power and estimated monthly payments across different rate scenarios. You can compare how switching from your current HDB loan to a bank loan would affect your finances.
Why More HDB Owners Are Switching to Bank Loans
Since early 2025, refinancing activity from HDB loans to bank loans has accelerated dramatically. DBS's POSB HDB loan take-up rate increased 13 times between October–November compared to the start of the year. OCBC and other major banks have similarly reported noticeable increases in refinancing demand.
The primary driver is rate arbitrage: the 1-percentage-point gap between HDB's 2.6% and competitive bank rates below 1.8% is too significant to ignore. However, mortgage advisors emphasize an important caveat: once you refinance from an HDB loan to a bank loan, you cannot switch back to an HDB loan in the future. This is a permanent decision that requires careful consideration.
Banks are competing aggressively for this refinancing business by offering:
- Cash rebates of S$2,000–S$2,800 for refinancing customers
- Free conversion options after 12–36 months (allowing switches between fixed and floating without penalties)
- No early repayment penalties during lock-in periods
- Flexible repayment structures
Interest Rate Outlook for 2026: What Experts Predict
The consensus among mortgage professionals is cautiously optimistic but realistic about future rate movements. Here's what to expect:
Near-term (January–June 2026): Refinancing activity is expected to remain healthy as borrowers whose loans originated in 2023–2024 reach the end of their lock-in periods. The 3-month SORA is predicted to stay between 1.3–1.4%, supporting continued competitive bank rates.
Mid-to-late 2026: Refinancing momentum may moderate as the pool of borrowers with high-rate older loans diminishes. Rate declines are likely to be modest, with most banks maintaining rates in the 1.5–1.8% range for fixed packages and around 1.3–1.4% for floating packages pegged to SORA.
Key uncertainties: US Federal Reserve policy, Singapore's inflation trajectory, and the strength of the Singapore dollar will all influence rates. If the Fed pauses rate cuts or Singapore's inflation rises, SORA could stabilize or increase slightly.
Redbrick Mortgage Advisory advises that "refinancing from mid-2026 will depend on the prevailing interest rates and the banks' promotional features and subsidies." This means timing and comparing offers becomes increasingly important as the year progresses.
How to Make Your Decision: A Practical Framework
Deciding whether to refinance or which rate type to choose requires evaluating several factors:
1. Your Current Rate and Lock-in Period
If you're locked into a rate above 2%, refinancing could yield significant savings. Check when your lock-in period ends to avoid early repayment penalties.
2. Your Risk Tolerance
Can you handle monthly payment fluctuations? If rates spike to 2–2.5%, would your budget absorb the increase? Risk-averse borrowers should lean toward fixed rates despite slightly higher initial rates.
3. Your Time Horizon
If you plan to sell or refinance again within 3–5 years, floating rates or shorter fixed periods make sense. If you're staying long-term, fixed rates provide peace of mind.
4. Refinancing Costs
Account for legal fees (S$800–S$1,500), valuation fees (S$300–S$600), and administrative charges. However, these are typically offset by the first year's interest savings if the rate difference exceeds 0.5%.
To evaluate all your options transparently, compare rates from DBS, OCBC, UOB, HSBC, Standard Chartered, and other major banks on Homejourney's bank rates page. You can see current offers, promotional incentives, and free conversion options side-by-side to make an informed decision.
Homejourney's Tools: Simplifying Your Rate Comparison
Navigating HDB loan interest rate options can feel overwhelming, which is why Homejourney has built tools specifically designed to help you make confident decisions:
- Live Rate Tracking: Track 3M SORA and 6M SORA rates updated daily, so you understand the benchmark driving bank rates.
- Multi-Bank Comparison: Compare rates, spreads, and promotional offers from all major banks in one place—no need to visit each bank's website separately.
- Mortgage Eligibility Calculator: Calculate your borrowing power instantly, factoring in your income, existing debts, and the TDSR/MSR limits.
- Simplified Application: Submit one application via Singpass, and banks can verify your income and employment data instantly for faster approval.
- Expert Guidance: Apply via Homejourney's bank rates page to connect with our mortgage brokers who provide personalized guidance based on your situation.
Homejourney prioritizes your safety and trustworthiness by verifying all rate information, ensuring transparency about terms and conditions, and helping you understand the true cost of each loan option.
Related HDB Financing Resources
For deeper insights into HDB financing, explore these comprehensive guides:
- HDB Loan vs Bank Loan 2026: Which Should You Choose? — A detailed comparison of both financing options to help you decide which aligns with your financial goals.
- HDB BTO Financing Guide 2026: Loans, Grants & Payment Timeline — Specific guidance for Build-to-Order flat buyers navigating the financing process.
- How to Use CPF for HDB Down Payment: Homejourney 2026 Guide — Maximize your CPF usage to reduce your down payment burden.
Frequently Asked Questions About HDB Loan Interest Rates
Q: Can the HDB loan rate increase in the future?
A: Yes, technically. The HDB rate is pegged to the CPF OA interest rate plus 0.1%. If CPF OA rates increase (which is determined by a formula based on Singapore's economic performance), the HDB rate would rise. However, this has remained stable for over a decade.
Q: What's the difference between 3-month and 6-month SORA?
A: The 3-month SORA reflects short-term rate expectations and is more volatile, while 6-month SORA is more stable. Most banks use 3-month SORA for pricing, which currently sits around 1.34%. Packages pegged to 6-month SORA may offer slightly higher rates but with less payment volatility.
