Last updated: 13 October 2026
Written by Clive Chng, Associate Director at Redbrick Mortgage Advisory
One of the most common questions I get from HDB homeowners is: “Should I stay on my HDB loan, or refinance to a bank loan?”
The follow-up question is usually: “If I move to a bank loan, can I move back to an HDB loan later?” It’s a fair question, and an important one. Your home loan is likely the largest debt you’ll ever carry, and the decision you make on it will shape your monthly cashflow for as long as you live in your flat.
So, should you switch from an HDB loan?
My honest answer has usually been that bank loans come out ahead. Yes, there have been periods when bank rates rose above the HDB concessionary rate of 2.60%. But over a longer period, say since 2014, the average bank loan rate has worked out to around 2.13%. That’s still lower than the HDB loan at 2.60%.
| Bank loans vs the HDB concessionary rate, 2014 to 2026 1. Around 70.6% of HDB bank loan cases since 2014 were priced below 2.60%. For most of that period, homeowners on bank loans paid less than they would have on an HDB loan. 2. 2023 and 2024 were the exception. The rate hike cycle pushed bank loans above the concessionary rate for roughly two years. Homeowners who locked in during that window would have done better on an HDB loan. 3. Today (2026), clients are getting 1.67% on average, about 0.93% p.a. below the concessionary rate. On a $500,000 loan, that’s roughly $4,650 a year, or $388 a month, in interest savings. Over the 12-year dataset, the average saving was 0.47% p.a. On a $500,000 loan, that’s about $2,350 less interest in the first year, or roughly $35,000 over a 25-year tenure. |
Bank loan rates have generally been lower than the HDB concessionary rate, but this has not always been the case. During the 2023 and 2024 rate-hike cycle, bank rates rose above the 2.60% HDB concessionary rate before falling again. This makes the new CPF-OA HDB Loan interesting, as its interest rate is pegged to the CPF Ordinary Account (OA) rate, like the HDB loan, rather than SORA.
| Period | Average bank rate | Compared with 2.60% HDB loan rate |
| 2014 to 2019 | 1.28% to 2.01% | Well below |
| 2020 to 2021 | 1.36% to 1.59% | Significantly below |
| 2022 | 1.97% | Below, but rising fast |
| 2023 | 3.54% | Above by 0.94%: (bank loans were more expensive) |
| 2024 | 2.93% | Above by 0.33% (bank loans were more expensive) |
| 2025 | 2.19% | Below again |
| 2026 (YTD) | 1.67% | Comfortably below |
That said, many clients still hesitate, and I understand why. Once you move from an HDB loan to a bank loan, you can’t move back. It’s a permanent decision, and it means giving up what I see as the HDB loan’s greatest strengths: flexibility and stability. With an HDB loan, there’s no lock-in period. You can prepay whenever you want, without penalty. You can sell whenever you want, without penalty. And the rate barely moves.
For many families, that peace of mind is worth more than the savings. The trade-off is that you pay 2.60% even when rates are at their lowest, at times when you could have secured a five-year fixed rate at around 1.50%.
So refinancing to a bank loan has always been a trade. You get a lower rate, which is usually what prompts the conversation in the first place. In return, you take on a lock-in period, penalties if you prepay or sell early, and rates that move with the market. Those rates can work very well for you, or against you.
DBS’s new CPF-OA pegged HDB home loan is potentially a package I’ve seen that makes this trade less painful. Here’s my take on it.
How is the DBS CPF-OA HDB Loan different from an HDB loan?
This is something many homeowners aren’t aware of, so I’d like to clarify it. Your HDB loan rate is pegged to the CPF Ordinary Account (OA) interest rate, plus 0.10%. The OA rate is currently 2.50%, which is why the HDB loan sits at 2.60%, and has stayed there for many years.
The DBS package is pegged to the same CPF-OA rate. But instead of sitting 0.10% above it, it sits below it:
| Period | DBS package | HDB loan | Difference |
| Years 1 to 3 | OA minus 0.72% = 1.78% | 2.60% | 0.82% lower |
| Year 4 to 5 | OA minus 0.30% = 2.20% | 2.60% | 0.40% lower |
| Year 6 onwards | OA minus 0.10% = 2.40% | 2.60% | 0.20% lower |
Because both loans track the same benchmark, the gap between them holds regardless of what happens to the OA rate. If the OA rate moves, both loans move together. At every stage of this package, you pay less than you would on an HDB loan.
The OA rate also has a legislated floor of 2.50%, and it has sat on that floor for a long time. It’s one of the most stable reference rates in Singapore. So you get something close to the stability of a fixed rate (yes, DBS’s CPF-OA Home loan rate is not considered a Fixed rate), and you aren’t subject to the fluctuations of SORA.
How this affects your monthly repayments
Interest rates are only half the story. What most homeowners relate to is the monthly instalment, so let’s look at it that way.
Say you have $400,000 outstanding on your HDB loan, with 25 years of tenure remaining. Here’s how your monthly instalments would compare:
| Period | HDB loan (2.60%) | DBS package | Monthly savings | Yearly savings |
| Years 1 to 3 | $1,991 | $1,832 | $159 | $1,908 |
| Year 4 | $1,991 | $1,902 | $89 | $1,068 |
| Year 5 onwards | $1,991 | $1,935 | $56 | $672 |
That’s about $160 a month back in your pocket for the first three years. Even after the rate steps up, your instalment stays below what you would pay on the HDB loan for the rest of the tenure.
In terms of total interest, that works out to roughly $9,400 saved over the first three years and about $12,375 by the end of Year 5, assuming the OA rate stays at 2.50%.
What about the lock-in period and penalties?
Earlier in the article, I mention that the other reason homeowners hesitate when deciding whether to move to a bank loan are that bank loans are less flexible than HDB loans. So let’s look at the restrictions that usually come with a bank loan: the lock-in period and its penalties.
When homeowners worry about a lock-in, it usually comes down to one of three concerns:
- “What if I get a bonus or have extra cash and want to pay down my loan?”
In other words: Will I be penalized for prepaying? - “What if I need to sell my flat?”
In other words: Will I be penalized for selling within the lock-in period? - “What if a better package comes along?”
In other words: Can I switch packages later, or am I stuck with this rate?
Here’s how this package addresses each one:
Partial prepayments are penalty free. Normally, partially prepaying a bank loan within the lock-in period costs 1.50% of the amount prepaid. Prepay $50,000, for example, and you’d pay a $750 penalty. With this package, partial prepayments carry no penalty. That’s very close to how an HDB loan treats partial prepayments.
Selling within the lock-in is penalty free. Normally, selling within the lock-in period costs 1.50% of your outstanding loan. On a $400,000 loan, that’s a $6,000 penalty. This package waives it completely. If you reach your MOP and decide to upgrade or right-size, you can sell without that cost, even within the three-year lock-in. (Redemption penalties don’t apply after the lock-in period anyway.) For owners approaching MOP, this removes one of the main risks of refinancing.
You can convert to another package for free after the lock-in. Once the lock-in period ends, you can switch to another DBS package at no cost. This is known as a free conversion, and it waives the fees you would normally pay to reprice within the same bank. You also remain free to refinance elsewhere. So if the rate environment changes, you aren’t stuck.
In short, the lock-in is three years on paper, but in practice most of the reasons you’d want to break it are already covered. That’s why I think this package offers most of the flexibility of an HDB loan, at a lower rate.
Who this may suit
In my view, this package is worth a closer look if you are:
- An HDB owner on the 2.60% HDB loan. You keep the benchmark you already know, at a lower rate, with most of the flexibility intact.
- An HDB owner on a bank loan coming off lock-in. If you’d rather not keep an eye on SORA every quarter, this offers near-fixed stability without overpaying for it.
- An owner approaching MOP who may upgrade. The sale waiver means refinancing now won’t cost you a penalty if you sell later.
- Expecting a lump sum. Bonuses, maturing investments or insurance policies, an inheritance, or proceeds from another asset can go towards your loan without penalty, giving you more options in how you manage your funds and your mortgage.
What you need to understand before switching
Here’s what I’d want every client to understand before switching.
Leaving your HDB loan is a one-way door. Once you refinance to a bank, you can’t return to an HDB loan. HDB is also generally more accommodating if you run into serious financial difficulty. For most stable, working households, the savings are worth it, but it’s a decision to make with your eyes open.
It may not suit you if your priority is the lowest possible rate. Because the CPF-OA rate has a 2.50% floor, this package won’t drop below 1.78% in the first three years. If SORA were to fall sharply, a floating package could be cheaper for a period and you technically “lose out” as you’re paying higher. With this package, you’re choosing certainty over chasing the lowest rate.
Read the terms and conditions. The package applies to HDB loans above $100,000. Check the legal subsidy or cash rebate, any clawback conditions, and make sure you’re comfortable with the prepayment conditions.
My take
HDB loan versus bank loan has always been the dilemma homeowners face. On one side, the flexibility and certainty of the HDB loan, at a higher rate. On the other, a lower rate, with a lock-in, penalties and exposure to market swings.
This is one of the better packages I’ve come across for narrowing that gap. It’s pegged to a benchmark you already know, your CPF-OA rate. It sits below the HDB loan rate at every stage. And it removes most of the penalties that made homeowners hesitant to leave their HDB loans in the first place.
If you’re on an HDB loan today, it’s worth running your own numbers. Take your outstanding loan and remaining tenure, and see what the difference means for your monthly cashflow. It won’t be the right fit for everyone, but for many HDB households, it’s an option that simply wasn’t available before.
Disclaimer: This article is for general information only and does not constitute financial advice. Figures are simplified illustrations based on a $400,000 loan over 25 years and assume the CPF-OA rate remains at 2.50%. Package terms are set by DBS and may change. Please assess your own financial situation and seek professional advice before making any decision.
Frequently Asked Questions
Q. Can I switch back to an HDB loan after taking the DBS CPF-OA HDB Loan?
No. Once you move from an HDB loan to a bank loan, you cannot move back to an HDB loan. This is a one-way decision.
Q. Is the DBS CPF-OA HDB Loan a fixed-rate loan?
No. The CPF-OA HDB Loan is pegged to the CPF Ordinary Account (OA) interest rate, so the rate can change if the CPF-OA rate changes.
Q. Can I make partial repayments during the lock-in period?
Yes. Partial prepayments are allowed without penalty, subject to the package terms and the minimum outstanding loan amount stated in the article.
Q. Is the DBS CPF-OA HDB Loan cheaper than an HDB loan?
Based on the rates illustrated in this article, the DBS CPF-OA HDB Loan is priced below the 2.60% HDB concessionary rate. However, whether switching makes sense depends on your own loan balance, remaining tenure and circumstances.
