HDB Loan Interest Rate vs Bank Loan 2026: The Definitive Comparison Guide

In 2026, Singapore homeowners face a critical decision: should you stick with an HDB loan's fixed 2.6% rate, or refinance to a bank loan offering rates as low as 1.35%? With thousands of HDB flat owners switching to bank financing and interest rates at three-year lows, understanding the differences between these two options has never been more important.

This comprehensive guide from Homejourney breaks down every aspect of HDB loans versus bank loans, helping you make an informed decision that protects your financial future. We've analyzed current market data, refinancing trends, and expert insights to create the definitive resource for Singapore property buyers and homeowners.

Table of Contents

• Executive Summary: HDB vs Bank Loans at a Glance
• Understanding HDB Loans: The Fixed 2.6% Rate
• Understanding Bank Loans: Floating and Fixed Options
• Current Interest Rate Comparison (2026)
• What is SORA? Understanding the Benchmark Rate
• Fixed vs Floating Rates: Which is Right for You?
• The Refinancing Boom: Why HDB Owners Are Switching
• Real Cost Analysis: Monthly Payments and Total Interest
• Decision Framework: How to Choose
• Frequently Asked Questions
• Next Steps: Your Path Forward with Homejourney

Executive Summary: HDB vs Bank Loans at a Glance

The mortgage landscape in Singapore has shifted dramatically. What was once a straightforward choice between HDB and bank financing now presents genuine financial opportunities for homeowners willing to understand the nuances.

The headline numbers: HDB's concessionary loan rate remains fixed at 2.6% per annum, while bank loan rates have dropped to between 1.35% and 1.8% for fixed packages, with some floating-rate options starting from 1M SORA + 0.25% (currently around 1.36%). This represents a significant gap that's driving unprecedented refinancing activity.

In the first nine months of 2025, OCBC Bank saw HDB homeowners switching to bank loans grow by more than 60% compared to the same period in 2024. DBS's POSB HDB loan take-up increased by 13 times from the start of the year. These aren't isolated cases—they represent a fundamental market shift driven by genuine savings opportunities.

However, the decision isn't purely about chasing the lowest rate. Once you switch from an HDB loan to a bank loan, you cannot return to HDB financing in the future. This irreversible choice requires careful consideration of your financial situation, risk tolerance, and long-term plans.

Understanding HDB Loans: The Fixed 2.6% Rate

What is the HDB Concessionary Loan Rate?

The HDB housing loan offers a concessionary interest rate, currently fixed at 2.6% per annum. This rate is calculated by taking the current CPF Ordinary Account interest rate (which is 2.5%) and adding 0.1%, resulting in the 2.6% figure. Importantly, this rate is pegged to the CPF OA rate, meaning if CPF rates change, the HDB rate changes accordingly—though this has remained stable for extended periods.

The 2.6% rate applies to all HDB flat purchases, regardless of whether you're a first-time buyer or upgrading from a smaller flat. It's one of the most consistent and predictable mortgage rates available in Singapore's financial system.

Key Characteristics of HDB Loans

• Fixed Interest Rate: Your rate never changes, providing absolute certainty in your monthly repayments
• Lower Down Payment: HDB requires only 10% down payment (compared to bank loans' 5-25%), split into two payments
• Higher Loan-to-Value Ratio: You can borrow up to 80% of the property value, compared to 75% with most bank loans
• Lenient Repayment Terms: HDB is known for flexible mortgage repayment policies and lower penalties
• CPF Usage: You can use your CPF Ordinary Account for both down payment and monthly repayments
• Loan Tenure: Available for up to 30 years, though maximum tenure is tied to your age at loan maturity

The Stability Advantage

For risk-averse homeowners, the HDB loan's fixed rate provides unparalleled peace of mind. Your monthly repayment remains constant throughout the entire loan tenure, making budgeting straightforward and protecting you from interest rate volatility. This stability has traditionally been the primary reason homeowners chose HDB financing, even when bank rates were comparable.

The HDB loan is particularly attractive for homeowners with tight budgets, unstable income, or those nearing retirement. Knowing your exact monthly obligation for 30 years eliminates financial uncertainty.

Understanding Bank Loans: Floating and Fixed Options

Bank Loan Structure and Rates

Bank housing loans in Singapore operate differently from HDB loans. Banks offer both fixed-rate and floating-rate packages, with rates determined by market conditions and individual borrower profiles.

As of February 2026, bank loan rates range from 1.35% to 1.8% for fixed-rate packages, with floating-rate options pegged to SORA (Singapore Overnight Rate Average). The lowest rates are typically reserved for larger loan amounts (above S$1-2 million), with standard borrowers accessing rates in the 1.55% to 1.8% range for fixed packages.

Fixed-Rate Bank Loans

Fixed-rate bank loans lock in a specific interest rate for a predetermined period, typically 1-3 years. After the lock-in period expires, the rate reverts to a floating rate pegged to SORA unless you refinance or reprice.

Current fixed-rate options include:

• 1-year fixed rates from 1.6% to 2.0%
• 2-year fixed rates from 1.55% to 1.8%
• 3-year fixed rates from 1.7% or lower (with some banks offering 1.55%)

For example, DBS's POSB HDB loan offers a 3-year fixed rate at 1.55% with no penalty for early repayment or sale during the lock-in period. OCBC offers 2-year fixed packages from 1.6% to 2.0%. These rates represent genuine savings compared to the HDB's 2.6% rate.

Floating-Rate Bank Loans

Floating-rate loans are pegged to a benchmark rate plus a bank spread. Most Singapore banks now use SORA (Singapore Overnight Rate Average) as their benchmark, replacing the older SIBOR system.

A typical floating-rate structure looks like: 1M SORA + 0.25% to 0.35% spread. With 1M SORA currently around 1.36%, this translates to initial rates of approximately 1.61% to 1.71%. However, as SORA moves, your rate and monthly payment adjust accordingly.

Bank Loan Requirements

• Down Payment: Typically 5% in cash (though some banks require 10-20%)
• Loan-to-Value Ratio: Maximum 75% of property value
• Income Requirements: Banks assess your Total Debt Service Ratio (TDSR), which cannot exceed 60%
• Credit Assessment: Banks conduct thorough credit checks and may adjust rates based on your profile
• Loan Tenure: Up to 30 years, subject to age and income requirements

Current Interest Rate Comparison (2026)

Side-by-Side Rate Comparison

The rate differential is stark. A 2-year fixed bank loan at 1.55% is 1.05 percentage points lower than the HDB's 2.6% rate. On a S$400,000 loan, this translates to approximately S$3,600 in first-year savings—enough to cover a round-trip flight to Tokyo for a family of three.

The chart below shows recent interest rate trends in Singapore to help you understand how rates have moved:

Why Has This Gap Emerged?

The widening gap between HDB and bank loan rates reflects broader economic trends. The HDB rate is pegged to the CPF Ordinary Account rate plus 0.1%, which has remained stable. Meanwhile, bank rates have fallen dramatically due to declining SORA rates, which have dropped from over 3.6% in 2023 to below 1.4% in early 2026.

This gap is temporary and cyclical. When interest rates rise, bank loan rates will increase, potentially narrowing or even reversing the advantage. However, for now, the opportunity is real and substantial.

What is SORA? Understanding the Benchmark Rate

The Basics of SORA

SORA stands for Singapore Overnight Rate Average. It's the benchmark interest rate that Singapore banks use to price most home loan packages. Understanding SORA is essential for anyone considering a floating-rate bank loan, as your monthly payment will fluctuate with this rate.

SORA is calculated as the average of all overnight interbank lending rates in Singapore, published daily by the Monetary Authority of Singapore (MAS). It replaced SIBOR (Singapore Interbank Offered Rate) as the primary benchmark in December 2024, making it the standard for virtually all new bank loan packages.

1M SORA vs 3M SORA vs 6M SORA

Banks offer floating-rate loans pegged to different SORA tenors:

• 1M SORA (1-Month): Resets monthly, most volatile but currently lowest at approximately 1.36%. Your payment changes monthly.
• 3M SORA (3-Month): Resets quarterly, moderate volatility. Currently around 1.34%. Your payment changes every three months.
• 6M SORA (6-Month): Resets semi-annually, least volatile. Currently around 1.33%. Your payment changes twice yearly.

Most borrowers choose 1M SORA for simplicity, though some prefer 3M or 6M SORA for more predictable payment schedules. The difference in rates is minimal—typically within 0.01-0.02%.

SORA Trends and 2026 Outlook

SORA has experienced dramatic decline from its 2023 peak of 3.6%+ to current levels below 1.4%. This decline reflects the Monetary Authority of Singapore's monetary policy stance and global interest rate trends.

Looking ahead to 2026, experts predict SORA will likely hover between 1.3% and 1.4% by year-end, assuming the US Federal Reserve continues gradual rate cuts and Singapore's inflation remains controlled. However, the bulk of the rate decline has already occurred—further drops are likely to be modest given current macroeconomic conditions.

This outlook is important: if you're considering a floating-rate loan, you're likely near the bottom of the interest rate cycle. Future movements are more likely to be upward than downward, so factor this into your decision.

Track Live SORA Rates on Homejourney

To make informed decisions about floating-rate loans, you need access to current SORA data. Homejourney's bank rates page tracks live 3M SORA and 6M SORA rates updated daily, allowing you to monitor trends and time your refinancing or application decisions perfectly. Visit Bank Rates to access real-time SORA tracking.

Fixed vs Floating Rates: Which is Right for You?

Fixed-Rate Advantages and Disadvantages

Advantages:

• Payment certainty: Your monthly repayment never changes during the fixed period
• Budgeting ease: You can plan finances with absolute precision
• Protection from rate rises: If SORA increases, your rate remains locked in
• Peace of mind: No surprises or financial stress from rate volatility
• Popular choice: Nearly 9 in 10 HDB homeowners who refinanced in 2025 chose fixed-rate packages

Disadvantages:

• Rate reversion: After the lock-in period (typically 1-3 years), your rate reverts to floating SORA + spread
• Higher initial rate: Fixed rates are typically higher than floating rates at the time of origination
• Refinancing required: To maintain favorable rates after lock-in, you'll need to refinance or reprice
• Limited flexibility: Early repayment may incur penalties (though some banks now offer penalty-free options)

Floating-Rate Advantages and Disadvantages

Advantages:

• Lower initial rate: Floating rates start lower than fixed rates (currently 1M SORA + 0.25% ≈ 1.61%)
• Potential savings: If SORA continues declining, your payments decrease
• Flexibility: Many banks offer free conversion to fixed rates or free repricing options
• No reversion risk: Your rate is always tied to the market benchmark

Disadvantages:

• Payment uncertainty: Your monthly repayment changes as SORA moves
• Budgeting difficulty: You cannot predict your exact monthly obligation
• Rising rate risk: If SORA increases significantly, your payments could become unaffordable
• Psychological stress: Rate volatility causes financial anxiety for many borrowers
• Current cycle risk: We're likely near the bottom of the rate cycle, so future movements are more likely upward

Who Should Choose Fixed Rates?

Fixed-rate loans are ideal for:

• First-time buyers with tight budgets who need payment certainty
• Homeowners nearing retirement who cannot afford payment increases
• Those with variable income (freelancers, commission-based workers)
• Risk-averse individuals who prioritize stability over potential savings
• Borrowers concerned about future rate increases

The data supports this preference: nearly 9 in 10 HDB homeowners who refinanced in 2025 chose fixed-rate packages, reflecting a strong desire for certainty and stable monthly repayments.

Who Should Choose Floating Rates?

Floating-rate loans suit:

• Borrowers with stable, high income who can absorb payment increases
• Those planning to refinance within 2-3 years
• Investors with multiple income streams
• People comfortable with financial volatility
• Those betting on continued SORA declines (though this is unlikely)

The Hybrid Approach: Repricing and Conversion Options

Many banks now offer flexible options that blur the fixed/floating distinction:

• Free Repricing: After 12-24 months, switch from floating to fixed without penalty or legal fees
• Free Conversion: Convert from fixed to floating (or vice versa) at no cost
• Flexible Lock-in: Some banks offer no penalty for early repayment or sale during the lock-in period

These options provide flexibility that didn't exist in previous years. A borrower might take a floating-rate loan initially, monitor SORA trends, and convert to fixed if rates begin rising—all without refinancing costs.

The Refinancing Boom: Why HDB Owners Are Switching

The Numbers Tell the Story

2025 witnessed unprecedented refinancing activity from HDB flat owners to bank loans. The data is striking:

• OCBC Bank: HDB homeowners switching to bank loans grew by more than 60% in the first nine months of 2025 compared to the same period in 2024
• DBS Bank: POSB HDB loan take-up increased by 13 times from the start of 2025
• Market-wide: Refinancing activity accelerated significantly across all major banks as homeowners recognized the savings opportunity

This isn't a marginal trend—it represents a fundamental shift in how Singapore homeowners approach mortgage financing. For the first time in decades, the HDB's fixed rate is genuinely uncompetitive compared to bank alternatives.

The Savings Reality

Consider a concrete example: A homeowner with a S$400,000 HDB loan at 2.6% switching to a bank loan at 1.55% (3-year fixed) saves approximately S$3,600 in the first year alone. This is real money that can be redirected to other financial goals.

For someone like Ms. Denise Chan, featured in recent market reports, the savings are even more dramatic. She refinanced her mortgage with DBS to a 2-year fixed loan at 1.6%—nearly half her previous 3% rate—saving approximately S$500 monthly. Over a 30-year loan tenure, such savings compound to hundreds of thousands of dollars.

Why Now? The Convergence of Factors

Three factors have created this refinancing opportunity:

1. SORA Decline: SORA has fallen from 3.6%+ to below 1.4%, directly lowering bank loan rates
2. Bank Competition: Banks are aggressively competing for HDB homeowners through attractive rates, cash rebates (S$2,000-2,800), and legal fee subsidies
3. Borrower Awareness: Homeowners increasingly understand the savings opportunity and are willing to refinance

The Irreversible Decision

However, there's a critical caveat: once you switch from an HDB loan to a bank loan, you cannot return to HDB financing in the future. This permanent choice requires careful consideration. Some homeowners remain cautious about refinancing precisely because of this restriction, even when the financial case is compelling.

This is where professional guidance becomes invaluable. Homejourney's mortgage brokers can help you assess whether refinancing aligns with your long-term financial plans and risk tolerance.

2026 Refinancing Outlook

Experts predict refinancing will remain healthy in 2026 but could moderate from mid-year onwards. Here's why:

• Many borrowers whose loans originated in 2023-2024 at 3-4% have already refinanced at lower rates
• The bulk of the rate decline has already occurred; further drops will be modest
• As the low-hanging fruit of refinancing is exhausted, activity will normalize
• HDB loan refinancing activity is expected to stay steady but not accelerate further

The implication: if you're considering refinancing, 2026 remains a favorable window, but the advantage may narrow in coming years.

Real Cost Analysis: Monthly Payments and Total Interest

Comparing Monthly Payments

Let's analyze a realistic scenario: a S$400,000 loan with a 30-year tenure.

*Estimates assume SORA remains between 1.3-1.5% throughout the loan tenure. Actual total interest depends on future SORA movements.

The monthly payment difference is substantial. Switching from an HDB loan at 2.6% to a bank loan at 1.55% reduces your monthly payment by S$104—S$1,248 annually. Over 30 years, this compounds to significant savings.

The Total Interest Calculation

Over a 30-year loan tenure, the interest savings are even more impressive:

• HDB Loan (2.6%): You pay S$170,600 in interest on top of your S$400,000 principal
• Bank Loan (1.55% fixed for 2 years, then floating): You pay approximately S$120,000-140,000 in interest, depending on future SORA movements
• Potential Savings: S$30,600 to S$50,600 over the life of the loan

These aren't theoretical numbers. They represent real money that could fund your children's education, build an investment portfolio, or provide retirement security.

Refinancing Costs: The Other Side of the Equation

However, refinancing isn't free. You must account for:

• Legal Fees: Typically S$800-1,500 (though many banks now subsidize these)
• Valuation Fees: Usually S$400-800
• Administrative Charges: Varies by bank, typically S$200-500
• Total Refinancing Cost: Approximately S$1,400-2,800

Banks are increasingly offering incentives to offset these costs. Cash rebates of S$2,000-2,800 and legal fee subsidies are now standard, meaning many homeowners can refinance with minimal out-of-pocket costs.

Break-Even Analysis

With monthly savings of S$104 and refinancing costs of approximately S$1,500, your break-even point is roughly 14-15 months. After this period, every month of lower payments represents pure savings.

For most homeowners, refinancing makes financial sense if:

• You plan to stay in your property for at least 2-3 years
• The rate differential is at least 0.5-1.0%
• You can absorb the refinancing costs (or the bank subsidizes them)

Calculate Your Specific Savings with Homejourney

Every homeowner's situation is unique. Loan amount, tenure, personal circumstances, and future plans all affect the refinancing decision. Rather than relying on generic calculations, use Homejourney's mortgage calculator to determine your specific monthly savings and break-even timeline. Visit Bank Rates to access our eligibility calculator and see personalized savings estimates.

Decision Framework: How to Choose

Step 1: Assess Your Financial Stability

Before refinancing, honestly evaluate your financial situation:

• Income Stability: Is your income stable and likely to continue? Can you afford higher payments if SORA rises?
• Emergency Reserves: Do you have 6+ months of expenses in savings? Refinancing should not deplete your emergency fund.
• Other Debts: What's your total debt service ratio? Banks will assess this during refinancing.
• Job Security: Are you confident in your employment? Floating-rate loans carry more risk if income becomes uncertain.

If your financial foundation is shaky, the stability of an HDB loan—or a fixed-rate bank loan—may be worth the higher interest rate.