With home loan rates dropping to their lowest point in three years, more HDB flat owners are making the switch to cheaper bank loans. The recent fall in interest rates, coupled with aggressive competition among local banks, has driven a noticeable rise in mortgage refinancing activity since the start of 2025.
Bank loan rates fall below 2%
As reported by The Straits Times, the trend has gained momentum as bank rates continue to fall below the HDB concessionary rate of 2.6%. According to Redbrick Mortgage Advisory associate director Clive Chng, both fixed- and floating-rate bank loan packages have dropped to between 1.55% and 1.8% over the past six months.
This drop has encouraged many HDB flat owners who took up higher-rate loans in 2022 and 2023 to refinance now that their lock-in periods have ended. Floating-rate packages, typically pegged to the three-month compounded Singapore Overnight Rate Average (SORA), have become especially attractive.
The three-month SORA, which stayed above 3.6% for most of 2023, has now fallen to around 1.34% as of 30 October — the lowest in more than three years. Analysts say rates could edge lower if the US Federal Reserve continues to ease monetary policy, Singapore’s inflation stays contained, and the Singapore dollar remains strong.
While refinancing among HDB owners has climbed, activity among private homeowners has remained stable. Mortgage Master chief executive, David Baey, said many private property owners are instead choosing to sell and purchase new homes rather than refinance their existing loans.
Some buyers view the lower rates as an opportunity to upgrade, taking on new loans instead of restructuring old ones.
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Refinancing momentum builds in 2025
Local banks have confirmed that refinancing activity has picked up sharply, particularly among HDB flat owners. Before this, the last major refinancing wave occurred between 2019 and 2020, when floating rates fell below 1.5%, leading to a 35% to 40% year-on-year jump in refinancing volumes from HDB to bank loans.
A similar wave appears to be forming in 2025. OCBC Bank reported that the number of HDB homeowners switching from HDB loans to OCBC home loans grew by more than 60% in the first nine months of the year compared with the same period in 2024.
OCBC’s head of home loans, Maryanne Phua, noted that most borrowers preferred fixed-rate options, with nearly nine in ten HDB owners who refinanced choosing them for more predictable monthly repayments.
At DBS Bank, head of deposits and secured lending, Chelsea Ling, also observed higher demand for the POSB HDB home loan, though exact figures were not disclosed. The bank’s three-year fixed-rate loan package offers rates of 1.7% or lower, with no penalty for early repayment or property sale during the lock-in period.
Ms Ling noted that switching from an HDB loan to the POSB HDB home loan could translate to around 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”.
Banks compete with rebates and flexible terms
Local banks are actively competing to attract homeowners with new refinancing incentives. Besides lower interest rates, they are offering cash rebates and legal fee subsidies to offset refinancing costs. Some packages also include flexible features, such as free conversion or repricing after the first year.
Repricing allows borrowers to switch to another interest rate package within the same bank, typically without penalties after the lock-in period ends.
According to Redbrick Mortgage Advisory, the most popular options in the market currently include a two-year fixed-rate loan at 1.48% with free conversion after one year, and a three-year fixed-rate loan at 1.5%.
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Outlook for 2026
The three-month SORA is expected to remain between 1.3% and 1.4% by the end of 2025, suggesting that refinancing momentum could carry into 2026. However, Cashew Mortgages managing director, Sebastian Sieber, said most of the rate declines have already taken place, with any further drops likely to be modest.
Redbrick’s Mr Chng added that refinancing demand should stay healthy through the first half of 2026, though activity could ease from mid-year onwards as most borrowers who locked in higher rates between 2023 and 2024 would have already refinanced.
He also noted that some HDB flat owners remain cautious about switching from an HDB loan to a bank loan, as the move is irreversible. Still, if rates continue to trend downward, more owners may choose to refinance to bank loans for potential savings.
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