More HDB flat owners refinancing to cheaper bank loans as interest rates drop to 3-year low
Lenders competing to offer attractive refinancing options means that homeowners are spoilt for choice
[SINGAPORE] With interest rates for home loans falling to their lowest in three years, and more competitive bank loan packages on the market, mortgage loan refinancing activity in Singapore has ratcheted up.
Since the start of 2025, more Housing Board flat owners, in particular, have switched to bank loans to save money as these have become significantly cheaper, local banks and mortgage brokers told The Straits Times.
Clive Chng, associate director at Redbrick Mortgage Advisory, said fixed and floating-rate bank loan packages have dropped to between 1.55 per cent and 1.8 per cent in the past six months. In comparison, the HDB concessionary loan rate is 2.6 per cent.
Lower interest rates have sparked interest from HDB flat owners who had taken higher fixed-rate bank packages in 2022 and 2023, and reached the end of their loan lock-in periods, said Joel Lim, associate director at Dollarback Mortgage.
Floating-rate packages are typically pegged to the three-month compounded Singapore Overnight Rate Average, or Sora, which banks use to price home loan packages.
For most of 2023, the Sora rate exceeded 3.6 per cent, but in the past week, it has fallen to below 1.4 per cent. As at Oct 30, the three-month Sora was at around 1.34 per cent per annum – the lowest rate in more than three years. This could drop further if the US Federal Reserve continues to cut interest rates, local inflation stays low, and the Singapore dollar remains strong.
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Lim said the last major refinancing wave occurred between 2019 and 2020, when floating rates fell below 1.5 per cent. At the time, refinancing volumes from HDB loans to bank loans jumped by between 35 per cent and 40 per cent year on year.
Refinancing activity in 2025, particularly from HDB flat owners, has picked up for OCBC Bank, said its head of home loans Maryanne Phua.
In the first nine months of the year, the number of HDB homeowners switching from an HDB loan to an OCBC home loan grew by more than 60 per cent compared with the same period in 2024, she said.
“Fixed-rate home loans are the preferred choice – nearly nine in 10 HDB homeowners who refinanced opted for them. This reflects a strong desire for certainty, as fixed rates offer stable monthly repayments that make budgeting easier,” she said.
At DBS Bank, Chelsea Ling, head of deposits and secured lending of its consumer banking group, also saw a noticeable increase in demand for POSB HDB home loans. The bank did not quantify what this increase was.
The three-year fixed-rate loan package offers an interest rate of 1.7 per cent or lower, with no penalty for paying down the POSB HDB home loan or selling one’s property within the lock-in period.
Refinancing from an HDB loan to the POSB HDB home loan would “translate to an estimated S$3,600 in first-year savings on a S$400,000 loan – enough to cover a round-trip flight from Singapore to Tokyo for a family of three,” Ling said.
Banks competing to offer attractive refinancing options means that homeowners are spoilt for choice.
In addition to lower rates, local banks have been offering cash rebates and legal fee subsidies to lower the costs of refinancing. Some home loan packages now come with flexible loan features, such as a free conversion – or free repricing – option after the first year, giving borrowers the flexibility to adapt should interest rates change course.
Repricing involves switching to a different interest rate package within the same bank. Banks typically provide free switching to a different interest rate package within the bank after the lock-in period expires.
According to Redbrick Mortgage Advisory, the most popular loan packages today include a two-year fixed-rate loan at 1.48 per cent with free conversion after the first year, and a three-year fixed-rate loan at 1.5 per cent.
But lower rates have not resulted in a spike in private home refinancing in 2025, according to Mortgage Master.
David Baey, the mortgage broker’s chief executive, said that instead of refinancing their current mortgages, some clients have opted to sell their existing private home and buy a new one, and are therefore taking new loans, as they feel upgrading has become more financially manageable.
With the three-month Sora expected to hover at between 1.3 per cent and 1.4 per cent by year-end, the refinancing tailwind could extend into 2026 as homeowners continue to take advantage of lower borrowing rates, said Sebastian Sieber, managing director of Cashew Mortgages.
“That said, the bulk of the rate decline has already occurred. While further declines are possible, they are likely to be modest, given current macroeconomic conditions,” he added.
Redbrick Mortgage Advisory believes refinancing should remain healthy in 2026, but could moderate from the middle of the year.
“This is because many borrowers whose loans originated in 2023 and 2024, and had been locked in at 3 per cent to 4 per cent, would have already refinanced at the lower rates,” Chng said.
“Refinancing from mid-2026 will depend on the prevailing interest rates and the banks’ promotional features and subsidies.”
Meanwhile, HDB loan refinancing activity is expected to stay steady in 2026, Chng said.
Some flat owners are cautious about refinancing from HDB loans to bank loans, because once they do so, they cannot switch back to an HDB loan in future. But if interest rates continue to fall, more HDB owners could opt to refinance to bank loans, he said. THE STRAITS TIMES
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