Interest Rates & Your Home Loan in Singapore
How interest rates change your monthly instalment, HDB loan vs bank loan, and the MSR and TDSR limits. A plain guide for Singapore home buyers.
11/2/20264 min read
Interest rate headlines can make buyers nervous. The good news is you do not need to predict rates to buy well. You need to understand how rates affect your monthly instalment and how much you can borrow, and leave yourself a buffer.
Why a small rate change matters
On a S$500,000 loan over 25 years, the monthly instalment is about S$2,268 at 2.6% a year. At 3.1% it rises to about S$2,397, and at 3.6% to about S$2,530. That is around S$260 more every month for a 1% rise. Try your own numbers in the loan calculator.
HDB loan or bank loan?
HDB loan: the interest rate is 2.6% a year, set at 0.1% above the CPF Ordinary Account rate, so it has been very stable. You can borrow up to 75% of the price or valuation, whichever is lower.
Bank loan: rates are usually pegged to SORA (floating) or fixed for 2 to 5 years before switching to floating. They can be lower or higher than the HDB rate depending on the market, and you need to pay at least 5% of the price in cash. If you start with an HDB loan you can refinance to a bank later, but you cannot switch from a bank loan back to an HDB loan.
How much can you borrow?
For HDB flats and new ECs, your monthly housing loan repayments cannot exceed 30% of your gross monthly income (the Mortgage Servicing Ratio). Banks also apply a 55% limit on all your monthly debts together (the Total Debt Servicing Ratio), and they test your loan at a higher rate than you actually pay. Check your budget with the HDB affordability calculator.
What to do when rates are uncertain
Keep a buffer so you could still pay if rates rose by 1%. Keep around 6 months of instalments as savings. Compare fixed and floating packages instead of chasing the lowest headline rate. Most importantly, buy a home that fits your plans, not one that only works if rates fall.
Planning a purchase? Terence can walk you through your budget, loan options and timing: WhatsApp Terence or read Budget Planning.
General information only, not financial advice. Figures are rounded examples. Loan rules and rates change, so confirm with HDB, MAS guidelines and your bank. Last updated November 2026.
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