Why is the interest rate currently charged by commercial banks lower than HDB’s concessionary loan?
Buyers of HDB flats have the option of taking up a housing loan either from HDB (if they are eligible) or from financial institutions (FIs) regulated by the Monetary Authority of Singapore.
The mortgage loan interest rates and accompanying terms offered by FIs are driven by their business strategies and the overall market conditions. These are dynamic and subject to fluctuations. For instance, it is a common practice for some banks to offer loan packages with low promotional interest rates for the first few years with a lock-in period, after which the interest rate could be revised in line with the prevailing market conditions.
On the other hand, HDB’s concessionary interest rate is pegged at 0.1% above the prevailing CPF interest rate, which currently stands at 2.5%.