DBS has launched a new HDB home loan with a rate linked to CPF, not the market. It starts at 1.78% a year.
The rates
| Years | Rate |
|---|
| 1 to 3 | 1.78% |
| 4 | 2.20% |
| 5 onwards | 2.40% |
These rates are set below the CPF-OA rate, currently 2.50%, and move with it.
Key things to know
- Minimum loan of S$100,000
- Borrow up to 75% of your flat's price
- 25% down payment, with at least 5% in cash
- 3-year lock-in, but no fees for paying early
- One free switch to another DBS package after 3 years
- Open to Singapore Citizens and PRs
Can the rate go up?
Only if the CPF-OA rate rises, and that is very unlikely. The CPF-OA rate follows the average deposit rates of Singapore's three local banks, with a legal floor of 2.50%. It has sat at that floor for more than 25 years. Even in 2023, when interest rates were at their highest in over a decade, it stayed at 2.50%.
The flip side: because of the floor, the rate can't go down either. If market rates fall, you won't benefit.
The downsides
- The rate rises on schedule. It goes from 1.78% to 2.20% in year 4 and 2.40% from year 5. On a S$500,000 loan, that's about S$3,100 more interest a year by year 5. This is the increase to plan for, not CPF, though you can refinance away in year 4.
- You miss out if rates fall. A loan linked to SORA could end up cheaper if market rates drop. This one won't follow them down.
- You need cash upfront. At least 5% of the price must be paid in cash, not CPF.
- You're tied to DBS for 3 years. The free switch after year 3 only applies to other DBS packages.
- Small loans don't qualify. The minimum loan is S$100,000.
Cashew's take
This is one of the most predictable HDB loans you can get. The CPF link is a strength, not a risk: the CPF-OA rate hasn't moved in over two decades, so for practical purposes your rate is fixed for the life of the loan. You're not betting on the market.
The real cost is DBS's own step-ups, but you don't have to ride them out. In year 4, once the lock-in ends, you can refinance to another bank. If your loan is large enough, the new bank will usually cover your refinancing costs, so switching costs you little or nothing.
Take it if you want certainty and low payments in the early years. Skip it if you expect rates to fall and are comfortable with a floating loan that could get cheaper.
Cashew can compare it with other banks' offers before you decide, and again when your lock-in ends.
Sources
Cashew
