Ask any homeowner in Singapore what the HDB loan interest rate is, and most will answer confidently: 2.6%. It has remained unchanged for over two decades, a rarity in a world of constantly shifting rates. But few understand why it’s 2.6%, when it could change, and when a bank loan might actually make better sense.

 

At Fairloan, we believe every homebuyer should understand not just the number, but the mechanism behind it. The 2.6% figure is not a fixed promise, it is a formula, and one that ties directly to Singapore’s CPF system.

 

The Link Between CPF and HDB Loan Rates

The HDB concessionary loan interest rate is pegged at 0.1% above the CPF Ordinary Account (OA) interest rate.

 

Since the CPF OA rate has been 2.5% per annum since July 1999, the HDB loan rate is therefore 2.5% + 0.1% = 2.6%.

 

In other words, the 2.6% rate is not an arbitrary policy number, it is a reflection of CPF’s stability. Because CPF rates are reviewed quarterly but rarely change, the HDB loan has enjoyed the same figure for decades, giving Singaporeans predictable financing for public housing.

 

When is it not 2.6%?

While the CPF OA rate has been constant since 1999, it can, in theory, change. If CPF increases its OA interest (for example, due to prolonged high inflation or shifts in global rates), the HDB rate will automatically rise as well,  still keeping the 0.1% premium.

 

For instance:

• If CPF OA = 2.75%, HDB loan = 2.85%
  
• If CPF OA = 3.00%, HDB loan = 3.10%
  
  

So, while “2.6%” feels permanent, it is not. It is simply that CPF rates have remained stable for more than 20 years.

 

Similarly, if CPF OA ever decreases (which is unlikely given the government’s guaranteed floor rate), the HDB loan will drop in tandem.

 

Who Can (and Cannot) Take an HDB Loan

HDB loans are meant to support eligible Singaporeans buying public housing. However, not everyone qualifies.

You can take an HDB loan if:

• You are a Singapore Citizen (SC), or SC + PR couple buying an HDB flat
  
• Your average monthly household income does not exceed the current HDB income ceiling (e.g., $14,000 for families, $7,000 for singles, $21,000 for extended or multi-generation families).
  
• You do not own or have recently disposed of private property in the past 30 months
  
• You have not taken two or more HDB loans before
  
  
  

Otherwise, the only option is a bank loan, which, depending on the market, may actually work in your favour and not that bad afterall. 

 

When a Bank Loan May Be Better

While the HDB rate provides stability, it doesn’t change, even when global rates fall.
That’s where bank loans come in. Their interest rates move with the market and can sometimes dip far below 2.6%.

 

For example, as of November 2025, local banks are offering:

• 5-year fixed-rate home loans at around 1.88%
  
• Floating SORA-based packages with effective rates near 1.55 – 1.65%
  
  

For homeowners with healthy financial buffers, these packages can mean significant monthly savings.

 

Let’s illustrate:

Example:

• Loan amount: $500,000
  
• HDB loan at 2.6% → $2,012/month
  
• Bank loan at 1.88% → $1,783/month
  That’s roughly $229 less per month, or over $13,000 saved across five years.
  
  

But Bank Loans Come With Trade-offs

HDB loans are forgiving: they allow flexible partial repayments, and no early repayment penalties. Bank loans, however, typically require stricter income assessments, and may charge lock-in penalties for early redemption during locked in period. 

 

Additionally, while bank rates are currently low, they are expected to rise in the future, and borrowers must be prepared for this volatility.

 

Fairloan’s Perspective: Stability vs Strategy

At Fairloan, we view the HDB loan as a long-term safety net and the bank loan as a short- to mid-term strategy tool.

 

When market rates are low,  such as the current environment, where SORA hovers near 1.2–1.3%(EIR 1.55% – 1.60%)  and 2years fixed packages sit around  1.6%, a well-structured bank loan can outperform the HDB loan significantly. (For loan amount at 500k SGD)

 

However, for homeowners who value security or plan to hold their property for the long term, the HDB loan’s predictability can be reassuring. There are no hidden spreads, no unexpected repricing, and no fear of volatility,  just a steady 2.6% backed by the CPF framework.

 

The smart approach is to match your financing choice with your life stage and risk appetite. Borrowers who are confident managing cash flow and monitoring rates can take advantage of bank promotions now, then consider refinancing back to fixed rates when volatility returns.

 

In Summary

The HDB loan’s 2.6% rate has been constant because it’s pegged to the CPF OA rate,  not because it’s immutable. In exceptional scenarios, the rate can move, though it rarely does.

 

For those eligible, the HDB loan remains a safe, reliable choice. But in today’s easing environment, bank loans offering 5 years fixed rates around 1.88% or floating SORA packages at 1.55%-1.60% can deliver meaningful savings, provided borrowers plan ahead, budget wisely, and stay flexible for future rate changes.

 

Whether you value certainty or optimisation, understanding how the 2.6% figure truly works empowers you to make an informed, strategic choice for your home and your future.

 

Read more on whether HDB loan or Bank loan is better here.