Erica Sham
The HDB concessionary loan charges 2.6% a year, and it has barely moved in years. The concessionary loan is HDB's own housing loan, offered to buyers who meet its eligibility rules. Bank packages, over the same decade, have been under 1.5% and over 4%.
The reason is in how each rate is set. HDB sets its rate at 0.1 percentage points above the CPF Ordinary Account rate, the CPF account your housing payments come from. That Ordinary Account rate has a floor written into law, and it has been 2.5% since July 1999. Banks price off the market instead, so their rates move.
So most people run one comparison: 2.6% against whatever the bank is quoting this week. That comparison is real, and over a long tenure the bank usually wins it. But it settles the smaller question. The bigger one is whether you are willing to give up the HDB loan's safety net permanently, because the switch runs in one direction only. Starting with HDB and refinancing to a bank later keeps both options open. Starting with a bank loan closes the HDB door for good.
This article is about HDB flats only. Most guides name the rate, the lock-in and the one-way rule. What they stop short of is telling you which of the two to take, and when.
Give the usual comparison its due, because it is right as far as it goes.
Over the past 20 years, a typical SORA-based bank package has been cheaper than HDB's rate roughly 76% of the time (182 of 240 months), on Cashew's own comparison of the two. SORA is the Singapore Overnight Rate Average, the benchmark most floating bank packages are priced against. A package quoted as "SORA + 0.5%" rises and falls as SORA does.
In money, over the same 20 years: on a $500,000 loan, a typical SORA+0.5% package would have saved roughly $70,000 in interest against HDB's fixed 2.6%, across a 20-year tenure.
The swings behind that average are wide. In 2020 and 2021 some homeowners secured bank rates below 1.5% a year. By 2022 and 2023, some borrowers were paying above 4%. HDB sat near 2.6% the whole time.
If the only thing you were buying was interest, the bank would usually be the answer. That's why most people stop here.
You are not choosing between two prices. You are choosing between two sets of terms, and only one of them lets you change your mind later.
The switch only goes one way. Once you refinance an HDB loan to a bank, you cannot move that loan back to an HDB loan, even if bank rates rise again afterwards. That rule applies even to a permanent resident (PR) household: according to PropKaki, quoting HDB, a PR household that took a bank loan for an HDB flat cannot switch to an HDB loan even after its members become Singapore citizens.
The exit terms differ. An HDB loan has no lock-in period and no penalty for repaying early or refinancing out. A lock-in is the period during which leaving the package costs you money. A bank loan typically locks you in for one to three years, with a penalty of around 1.5% of the outstanding loan if you leave inside it.
The cash at the start differs. An HDB loan allows up to 75% loan-to-value, which is the share of the price the lender will lend you, so the 25% downpayment can be paid entirely from CPF with no cash required. A bank loan requires at least 5% of the purchase price in cash (PropKaki, reflecting the MAS downpayment rule for bank-financed property loans).
One thing is the same whichever lender you use. The Mortgage Servicing Ratio caps repayments on an HDB-flat loan at 30% of your gross monthly income, and the Total Debt Servicing Ratio caps all your debt repayments together at 55%. Both are applied when your loan is approved, which means they decide how much you are allowed to borrow before any of the choices below come into play.
So the HDB loan's value is not its rate. It is that you can leave it at any time at no cost, and that it asks for no cash up front. That is the safety net, and it is those three terms.
Here is the mechanism, step by step.
That's why the HDB loan looks dear in a cheap year and kind in an expensive one. You are choosing between a rate designed not to move and a rate designed to.
Covers HDB flats only. Captured on 5 October 2026. The HDB rate and terms are from CPF Board and MoneySense; the bank column describes typical terms from those same sources, not a live quote. Check any bank figure against a dated quote before you decide.
| HDB concessionary loan | Bank loan | |
|---|---|---|
| Interest rate | 2.6% a year, set at CPF Ordinary Account rate + 0.1 percentage points | Priced off the market, usually SORA plus a margin |
| How much it moves | Barely: the Ordinary Account rate has been 2.5% since July 1999 | A lot: below 1.5% in 2020 to 2021, above 4% for some borrowers in 2022 to 2023 |
| Cash required at purchase | None: HDB lends up to 75% loan-to-value, and the 25% downpayment can come entirely from CPF | At least 5% of the purchase price in cash |
| Lock-in period | None | Typically one to three years |
| Penalty for leaving early | None | Around 1.5% of the outstanding loan inside the lock-in |
| Can you switch back to an HDB loan later? | You can switch out to a bank at any time | No. Not even a PR household whose members later become citizens |
| Time to process a switch | About 6 to 8 weeks to move to a bank (PropKaki, quoting HDB) | Not applicable |
Two things stand out.
First, every advantage the bank loan has is about price. Every advantage the HDB loan has is about your freedom to change your mind.
Second, the switch runs one way, which makes the HDB loan the only one of the two you can start with and still keep both options.
The answer turns on three things: how steady your income is, how much cash you keep after the purchase, and how long you plan to hold the flat.
On income, the line is predictability rather than size. A salary you can forecast twelve months out behaves differently from commission, freelance work or a bonus-heavy package when the instalment rises.
On cash, the working threshold we use with clients is about six months of expenses still in hand after you have paid the downpayment and the fees. That is Cashew's rule of thumb, not a regulator's figure. The buffer is what lets you sit through the years the floating rate runs against you, which on the 20-year record is roughly one year in five.
On tenure, a long hold is what gives the rate advantage time to show up. A short one does the opposite, and there the specific product matters: a fixed bank package with a sale waiver clause can beat the HDB loan outright. A sale waiver clause removes the early redemption penalty when you sell, so you get the lower fixed rate without paying to exit. That case depends on having a real exit timeline, not a vague one.
DBS's HDB-flat loan prices its rate below the CPF Ordinary Account rate, so it undercuts HDB's 2.6%.
It is still a bank loan. That means it carries a bank loan's consequences: the cash downpayment, and the one-way rule. Taking it closes the HDB door the same way any other bank loan does.
So the rate is a point in its favour. It does not change which side of the door you end up on.
The order you do this in matters more than the rate you start on.
Because an HDB loan has no lock-in and no prepayment penalty, you can refinance out to a bank whenever the numbers suit you. The switch takes HDB roughly 6 to 8 weeks to process (PropKaki, quoting HDB), so it is something to plan rather than something to do in reaction to one week's rates.
Switching is not free. You pay legal and conveyancing fees, which is the legal work of moving the loan from one lender to the other and is often partly subsidised by the new bank, a valuation fee, and any prepayment penalty if you are still inside a lock-in. On an HDB loan there is none.
What matters is comparing monthly saving against one-off cost. Cashew's refinance calculator shows this on a bank-to-bank move, where the rate gap is widest. On a $700,000 outstanding loan over 20 years, going from 4.2% to 3.3% cuts the instalment by about $330 a month, roughly $3,960 a year, and recovers a $2,500 switching cost in under eight months. Your gap from 2.6% will be narrower than that, so your breakeven will be longer. The arithmetic is the same either way.
The reverse has no exit. A bank loan taken at purchase cannot be turned back into an HDB loan later. Starting with HDB keeps both doors open. Starting with a bank keeps one.
Before you give up the HDB loan, put your own outstanding amount, your tenure and the rate you have been quoted through Cashew's refinance calculator and look at the breakeven. If the saving does not clear your switching costs comfortably, the door is worth keeping open.
About 1 in 5 private home resales in Singapore's prime region (Core Central Region) were sold at a loss in Q3 2026, well above the islandwide rate of 4.6%. These losses were concentrated in a handful of long-time weak resale performers, such as OUE Twin Peaks, Marina One, V on Shenton, and Cape Royale, rather than reflecting the prime segment as a whole, so a project's own resale track record matters more than its district when assessing value retention.
Jay Sadarangani·3 Nov 2026
Thomson Reserve sold 1,143 units (90%) over its launch weekend at an average of $2,900 psf, with all 3- and 4-bedroom units sold out and only 123 two-bedders and two five-bedroom suites remaining from $1.635M. This single-project result shows larger units sold fastest and most buyers were Singaporeans purchasing to live in or invest, but it does not prove broader market trends, underscoring the need to secure financing and loan eligibility before any launch weekend.
Stanley Tan·2 Nov 2026© 2026 Cashew. All rights reserved.
