HDB Loan Interest Rate Trends Analysis: What's Happening in 2026
HDB loan interest rates remain fixed at 2.6% per annum in 2026, but the real story lies in how this compares to rapidly falling bank mortgage rates and what this means for your refinancing decisions. With bank rates now dropping to 1.55% to 1.8% for fixed packages, many HDB flat owners are facing a critical choice: stay with the stability of an HDB loan or refinance to a cheaper bank mortgage. Understanding these trends is essential for making the right financial decision for your property.
The Fixed HDB Rate vs. Market Reality
The HDB concessionary loan rate of 2.6% is pegged at 0.1% above the CPF Ordinary Account (OA) rate, which currently sits at 2.5%. This fixed rate has been a cornerstone of Singapore's housing policy for decades, offering predictability and protection from market volatility. However, this stability now comes at a cost—bank mortgage rates have fallen significantly below this level.
According to recent data, fixed-rate bank home loans are now available at rates between 1.55% and 1.8% per annum, representing a gap of nearly 0.8% to 1.05% compared to the HDB rate. For a typical S$400,000 HDB loan, this difference translates to approximately S$3,200 to S$4,200 in annual savings, or roughly S$267 to S$350 monthly. This substantial gap has triggered unprecedented refinancing activity among HDB flat owners in 2025 and early 2026.
Understanding SORA and Its Impact on Bank Rates
The primary driver behind falling bank mortgage rates is the Singapore Overnight Rate Average (SORA), the benchmark rate that most Singapore banks use to price home loan packages. SORA has fallen dramatically from over 3.6% for most of 2023 to below 1.4% by late 2025, and this downward trend continues into 2026.
Banks typically offer two types of floating-rate packages: those pegged to the 3-month SORA and those pegged to the 6-month SORA. The 3-month SORA, which was around 1.34% in late 2025, is more sensitive to immediate market changes and typically offers lower initial rates but carries more volatility. The 6-month SORA provides slightly more stability by averaging rates over a longer period. Both benchmarks have created an environment where floating rates are substantially cheaper than the fixed HDB rate.
The chart below shows recent interest rate trends in Singapore to help you understand how SORA and mortgage rates have evolved:
As you can see from the chart, the downward trajectory of rates has been consistent, with most predictions suggesting rates will hover between 1.3% and 1.4% by the end of 2026. However, experts caution that the bulk of the rate decline has already occurred, and future drops are likely to be modest.
Fixed vs. Floating Rate Bank Loans: Which Should You Choose?
When refinancing from an HDB loan to a bank mortgage, you'll encounter two primary options: fixed-rate and floating-rate packages. Understanding the differences is crucial for your decision.
Fixed-Rate Packages (1-3 Years) lock in your interest rate for a predetermined period, typically 1 to 3 years. Current fixed rates range from 1.55% to 1.8% per annum. After the lock-in period expires, your rate typically reverts to a floating rate. The advantage is budget certainty—your monthly repayment remains constant throughout the fixed period. Nearly 9 in 10 HDB homeowners who refinanced in 2025 chose fixed-rate packages, reflecting a strong preference for predictability. The downside is that you're locked in; if rates fall further, you cannot immediately benefit unless you pay early repayment penalties or wait for your lock-in period to end.
Floating-Rate Packages are pegged to SORA plus a bank margin (typically 0.25% to 0.5%). These rates fluctuate monthly based on SORA movements. The current advantage is that floating rates are extremely competitive—some packages start at SORA + 0.25%, which translates to approximately 1.36% to 1.6% depending on the current SORA level. However, if SORA rises in the future, your monthly repayment increases accordingly, creating budget uncertainty.
Current Bank Rates and Competitive Landscape
Singapore's major banks are aggressively competing for refinancing customers. Here's what the market offered in early 2026:
- DBS Bank (POSB HDB Loan): 3-year fixed rate at 1.55% to 1.7% per annum, with no penalty for early repayment or property sale during the lock-in period. Estimated first-year savings of S$3,600 on a S$400,000 loan.
- OCBC Bank: 3-year fixed rates at 1.7% or lower, with refinancing activity from HDB owners growing by over 60% in the first nine months of 2025 compared to 2024.
- Other Major Banks: Competitive fixed rates between 1.55% and 1.8%, with floating rates starting from SORA + 0.25%.
Beyond competitive rates, banks are offering additional incentives to attract refinancing customers. Cash rebates ranging from S$2,000 to S$2,800 are common, particularly for loans above S$1 million. Legal fee subsidies and free conversion options (allowing you to switch from floating to fixed or vice versa after 12-36 months without penalty) are increasingly standard features.
The Refinancing Boom: Why HDB Owners Are Switching
The shift from HDB loans to bank financing represents a significant trend. In the first nine months of 2025, OCBC saw HDB homeowners switching to their home loans increase by over 60% compared to the same period in 2024. DBS reported that take-up rates for its POSB HDB loan increased 13 times between October-November 2025 compared to the start of the year.
This refinancing activity is driven by simple mathematics: the monthly savings are substantial. A homeowner with a S$400,000 HDB loan refinancing to a bank rate of 1.6% would save approximately S$500 monthly compared to their previous rate. Over a 25-year remaining loan period, this represents over S$150,000 in total savings. For many families, this is equivalent to a significant financial windfall that can be redirected toward investments, education, or debt reduction.
The Critical Trade-Off: Irreversibility
However, there's an important caveat that every HDB owner must understand: once you refinance from an HDB loan to a bank loan, you cannot switch back to an HDB loan in the future. This irreversible decision requires careful consideration of your long-term financial situation.
If you refinance to a bank loan and rates subsequently rise significantly, you're locked into higher rates without the option to return to the HDB's fixed 2.6% rate. Conversely, if rates continue to fall, you benefit from lower rates as a bank customer. The decision hinges on your risk tolerance and economic outlook. Conservative borrowers who prioritize budget certainty may prefer to maintain their HDB loan despite the rate gap. Borrowers comfortable with market volatility and confident in their financial stability may view refinancing as a rational financial decision.
Interest Rate Outlook for 2026 and Beyond
Market experts offer cautiously optimistic predictions for 2026. The three-month SORA is expected to hover between 1.3% and 1.4% by year-end, suggesting that bank mortgage rates will remain competitive relative to the HDB rate. However, the consensus is that the bulk of the rate decline has already occurred. Further decreases are possible but likely to be modest, contingent on the US Federal Reserve's monetary policy, Singapore's inflation trajectory, and the Singapore dollar's strength.
Redbrick Mortgage Advisory predicts that refinancing activity will remain healthy through mid-2026 but could moderate from the second half of the year, as many borrowers locked in at 3% to 4% in 2023-2024 will have already refinanced. By late 2026, refinancing decisions will increasingly depend on prevailing rates at that time and banks' promotional features.
Making Your Refinancing Decision: A Practical Framework
If you're considering refinancing from an HDB loan to a bank mortgage, use this framework to evaluate your options:
- Calculate Your Potential Savings: Use Homejourney's mortgage calculator to determine your exact monthly savings at current bank rates. Factor in refinancing costs including legal fees (typically S$800-1,200), valuation fees (S$300-500), and administrative charges. Most refinancing pays for itself within 12-18 months through monthly savings.
- Assess Your Risk Tolerance: Are you comfortable with the possibility of rates rising in the future? If you need absolute budget certainty, an HDB loan's fixed rate may be worth the premium. If you can accommodate rate fluctuations, bank financing offers better value.
- Evaluate Your Lock-In Period: If your current bank loan has a lock-in period, calculate the early repayment penalty. Some newer packages have no penalty for refinancing, making the decision easier.
- Compare Banks Comprehensively: Don't rely on advertised rates alone. Use Bank Rates to compare rates from DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, and other major banks side-by-side. Consider the full package including cash rebates, fee subsidies, and flexible features like free conversion options.
- Time Your Refinancing: If you're currently in a lock-in period, mark your calendar for when it ends. Refinancing immediately after the lock-in period expires allows you to capture current low rates without penalties.
CPF Considerations in Your Refinancing Decision
An often-overlooked aspect of refinancing is how it affects your CPF Ordinary Account (OA). When you have an HDB loan, your CPF OA balance earns interest at the CPF rate (currently 2.5% per annum). When you refinance to a bank loan, you're no longer using CPF for repayments, which means your CPF OA balance stops earning the CPF interest rate on that portion of your funds.
However, this is typically not a significant concern because the monthly savings from refinancing far exceed the foregone CPF interest. For example, on a S$400,000 loan, the monthly savings of S$300-400 vastly outweigh the CPF interest you'd earn on that amount. Nevertheless, it's worth considering if you're on the fence about refinancing. For comprehensive guidance on CPF usage in HDB financing, refer to CPF for HDB Purchase: Homejourney's Complete Usage Guide .
How Homejourney Helps You Navigate HDB Refinancing
Homejourney is committed to helping you make informed, confident decisions about your home financing. Our platform provides:
- Real-Time Bank Rate Comparison: Compare current rates from all major Singapore banks on our Bank Rates page. See fixed and floating rates, lock-in periods, cash rebates, and fee subsidies all in one place.
- Live SORA Tracking: Monitor 3-month and 6-month SORA rates updated daily, helping you understand how benchmark rates are moving and when might be optimal timing for your refinancing decision.
- Mortgage Eligibility Calculator: Calculate your borrowing power and estimated monthly repayments instantly based on your income, existing debts, and property value.
- Multi-Bank Application: Submit one application via our platform and receive personalized rate offers from multiple banks. Using Singpass integration, your income and employment data can be verified instantly, accelerating the approval process.
- Transparent Guidance: Our content and tools prioritize your safety and trustworthiness. We verify all information against official sources and provide clear disclaimers where appropriate.
Start your refinancing journey by visiting Homejourney's Bank Rates to compare current rates and explore your options.
Frequently Asked Questions About HDB Loan Interest Rate Trends
Q: Will the HDB loan interest rate of 2.6% ever decrease?
A: The HDB rate is pegged at CPF OA rate + 0.1%. It will only decrease if the CPF OA rate decreases, which is determined by CPF's investment returns and government policy. While possible, significant decreases are unlikely in the near term. The CPF OA rate has remained relatively stable historically.
Q: Is now the right time to refinance from an HDB loan to a bank loan?
A: With bank rates at 1.55% to 1.8% versus the HDB rate of 2.6%, refinancing offers substantial monthly savings. However, the decision depends on your risk tolerance, long-term plans, and comfort with market volatility. Use Homejourney's calculator to quantify your potential savings and assess whether the benefits justify refinancing costs.
Q: What happens to my refinancing if SORA rates rise significantly in the future?
A: If you choose a fixed-rate package (1-3 years), your rate remains locked in even if SORA rises. After the lock-in period, you can refinance again or convert to a different package. If you choose a floating-rate package, your monthly repayment will increase if SORA rises. Many banks now offer free conversion options allowing you to switch from floating to fixed without penalty.
Q: Can I refinance multiple times?
A: Yes, you can refinance multiple times. However, each refinancing incurs costs (legal fees, valuation fees). Most experts recommend refinancing when the rate difference justifies the costs—typically a gap of 0.5% or more. After your initial refinancing, you can refinance again if rates drop significantly or if your financial situation changes.
