HDB Loan Interest Rate Trends Analysis: What You Need to Know in 2026
HDB loan interest rates remain fixed at 2.6% per annum, but the real story in Singapore's mortgage market isn't about HDB rates—it's about how dramatically bank loan rates have fallen below them.[1] For the first time in years, HDB flat owners face a critical decision: stick with the stability of HDB financing or refinance to bank loans now offering rates as low as 1.55% to 1.8%.[2][3] Understanding these interest rate trends is essential for making informed decisions about your home financing strategy.
This analysis examines the current HDB loan interest rate landscape, compares it against bank alternatives, and helps you determine whether refinancing makes sense for your situation. At Homejourney, we believe informed borrowers make better financial decisions—and that's why we're committed to providing transparent, verified information about Singapore's mortgage market.
The Current HDB Loan Interest Rate: Fixed Stability vs. Market Opportunity
The HDB concessionary loan rate is pegged at 0.1% above the Central Provident Fund Ordinary Account (CPF OA) rate, which is currently set at 2.5%, resulting in the fixed HDB rate of 2.6% per annum.[1][6] This rate has remained stable and predictable, providing borrowers with certainty about their monthly repayments—a significant advantage for budgeting and financial planning.
However, this fixed rate advantage has eroded substantially. Bank mortgage rates have dropped to between 1.55% and 1.8% for three-year fixed packages, creating a 0.8% to 1.05% spread between HDB and bank financing.[2][3] For a S$400,000 loan, this difference translates to approximately S$3,600 in first-year savings alone by refinancing to a bank loan.[3]
The key distinction is that HDB rates are concessionary (subsidized by the government), while bank rates fluctuate based on market conditions, primarily driven by the Singapore Overnight Rate Average (SORA).
Understanding SORA: The Benchmark Driving Bank Loan Rates
SORA (Singapore Overnight Rate Average) is the benchmark interest rate that most Singapore banks use to price floating-rate home loan packages.[3] This rate has experienced dramatic movements recently, falling from above 3.6% for most of 2023 to below 1.4% by late 2025.[3] As of October 2025, the three-month SORA was at approximately 1.34% per annum—the lowest rate in more than three years.[3]
When banks offer floating-rate packages, they typically peg them to the three-month compounded SORA plus a margin (often 0.25% to 0.5%). This means when SORA falls, your interest rate falls proportionally. Conversely, if SORA rises, so does your monthly payment.
The chart below shows recent SORA trends and how they've influenced the mortgage market:
Banks are predicting that the three-month SORA will hover between 1.3% and 1.4% through the end of 2026, suggesting that the dramatic rate decline has largely concluded, though modest further decreases remain possible if the US Federal Reserve continues cutting rates and Singapore maintains low inflation.[3]
Fixed vs. Floating Rate Mortgages: Which Suits Your Situation?
The current interest rate environment has created a clear preference among Singapore borrowers. Nearly nine in 10 HDB homeowners who refinanced in 2025 chose fixed-rate packages over floating options.[3] This preference reflects a strong desire for certainty and predictable monthly repayments, especially given the volatility experienced in 2022-2023.
Fixed-Rate Mortgages (1.55% to 1.8% for 3-year terms) offer stable monthly payments regardless of market movements. You know exactly what you'll pay each month, making budgeting straightforward. The trade-off is that if SORA rates fall further, you won't benefit from lower rates unless you refinance again.
Floating-Rate Mortgages (currently 1M SORA + 0.25% to 0.5%) adjust with market conditions. If SORA falls, your payments decrease automatically. However, if SORA rises, your payments increase—creating budget uncertainty. Floating rates are currently attractive because SORA is at three-year lows, but this advantage could reverse if economic conditions change.
For most borrowers in 2026, fixed rates provide the psychological comfort and budgeting certainty that floating rates cannot match—particularly if you're already accustomed to HDB's fixed 2.6% rate.
The Refinancing Surge: Why HDB Owners Are Switching to Banks
Refinancing activity has accelerated dramatically. OCBC Bank reported that in the first nine months of 2025, the number of HDB homeowners switching from HDB loans to OCBC home loans grew by more than 60% compared with the same period in 2024.[3] DBS saw take-up rates for its POSB HDB loan increase by 13 times compared to the start of 2025.[1]
This migration is driven by three factors:
- Rate differential: The 0.8% to 1.05% gap between HDB (2.6%) and bank rates (1.55% to 1.8%) creates substantial savings over a 30-year mortgage.
- Lock-in period expirations: HDB owners who took higher fixed-rate bank loans in 2022-2023 (at 3% to 4%) are now reaching the end of their lock-in periods and can refinance at significantly lower rates without penalties.
- Competitive incentives: Banks are offering cash rebates (S$2,000 to S$2,800), legal fee subsidies, and free conversion options to attract refinancing customers.[3][6]
One real example: Ms. Denise Chan repriced her DBS mortgage to a two-year fixed loan at 1.6%—nearly half her previous 3% rate—saving approximately S$500 monthly.[1]
However, refinancing comes with an important caveat: once you switch from an HDB loan to a bank loan, you cannot return to HDB financing in the future.[1] This permanent decision requires careful consideration of your long-term financial strategy.
Comparing HDB Loans vs. Bank Loans: The Complete Picture
While interest rates tell part of the story, other loan features matter equally:
| Feature | HDB Loan | Bank Loan |
|---|---|---|
| Interest Rate | 2.6% (fixed) | 1.55% - 1.8% (fixed) or floating |
| Loan-to-Value Ratio | 80% | 75% |
| Down Payment | 20% (cash or CPF) | 25% (typically) |
| Early Repayment Penalty | None | Varies (often none after lock-in) |
| Flexibility | Limited (government rules) | Higher (free conversion options) |
Bank loans offer lower rates and greater flexibility, but require a larger down payment and cannot be reversed once you switch from HDB financing.[2][4]
Interest Rate Outlook for 2026: What Experts Predict
Mortgage advisers and market analysts offer cautiously optimistic outlooks for 2026:
- Continued refinancing activity: Redbrick Mortgage Advisory expects refinancing to remain healthy in 2026, though it could moderate from mid-year as borrowers whose loans originated in 2023-2024 have already refinanced.[3]
- Modest rate declines: While further SORA decreases are possible, they're likely to be modest given current macroeconomic conditions.[3] The bulk of the rate decline has already occurred.
- Stable HDB rates: The HDB concessionary rate of 2.6% will likely remain unchanged, as it's pegged to the CPF OA rate which moves infrequently.
- Competitive incentives: Banks will likely continue offering cash rebates and legal fee subsidies to attract refinancing customers, though these promotions may become less aggressive if refinancing volume slows.
The refinancing window remains open in 2026, but it's narrowing. Homeowners considering refinancing should act before mid-year when promotional intensity may decrease.
Making Your Decision: Should You Refinance Your HDB Loan?
Refinancing from HDB to a bank loan makes financial sense if:
- You can save at least 0.5% to 0.8% on your interest rate (the difference between HDB's 2.6% and current bank rates)
- Your remaining loan tenure is long enough to recoup refinancing costs (legal fees, valuation fees, typically S$1,500 to S$3,000)
- You're comfortable with the permanent decision to leave HDB financing
- You understand your risk tolerance with fixed vs. floating rates
Refinancing may not make sense if:
- Your remaining loan tenure is very short (less than 5-7 years)
- You value the simplicity and government backing of HDB loans
- You're uncertain about future interest rate movements and prefer HDB's stability
- You're approaching retirement and want predictable payments
At Homejourney, we believe the best decision is an informed one. That's why we've created tools to help you evaluate your options:
- Compare rates from all major banks: Our bank rates page lets you see current offerings from DBS, OCBC, UOB, HSBC, Standard Chartered, Maybank, and more in one place, updated daily with live SORA rates.
- Calculate your savings: Use our mortgage calculator to determine exactly how much you'd save by refinancing, accounting for your specific loan amount and tenure.
- Apply via Singpass: Submit one application and receive personalized rate offers from all partner banks. Your income and employment data are verified instantly through Singpass, speeding up the approval process.
Visit Bank Rates to compare rates and calculate your refinancing potential.
Key Considerations for HDB BTO Buyers
If you're purchasing a new Build-to-Order (BTO) flat, understanding interest rate trends helps you make better financing decisions. Most BTO buyers can choose between HDB loans and bank financing from day one. The current rate environment favors bank loans for borrowers comfortable with market-based pricing.
For comprehensive guidance on BTO financing options, see our HDB BTO Financing Complete Guide 2026 | Homejourney which covers HDB BTO financing in detail.
Additionally, understanding how to optimize your CPF usage for down payments works in tandem with interest rate decisions. Read How to Use CPF for HDB Down Payment: Homejourney's 2026 Guide to learn how to maximize your CPF contribution while minimizing your loan amount.
FAQ: HDB Loan Interest Rate Trends
Why are bank loan rates lower than HDB rates?
Bank rates are market-based and respond to SORA movements, which have fallen to three-year lows. HDB rates are concessionary (subsidized by the government) and remain fixed at 2.6%, which is no longer competitive with market rates. Banks are using lower SORA rates to offer attractive financing and capture refinancing business from HDB borrowers.
