SINGAPORE: Starting April 1, there will be a new loan option for HDB home buyers.
The new POSB HDB Loan will offer a floating interest rate capped below the HDB’s concessionary rates for ten years.
The HDB concessionary interest rate is pegged at 0.1 percentage point above the prevailing CPF interest rate.
DBS said the POSB HDB Loan allows buyers to benefit from the current low interest rates and at the same time, gives a ten-year protection against rising interest rates.
The majority of HDB home buyers took a direct loan from HDB last year.
However, when compared to other bank loans in the market, analysts says the new POSB loan starts at a higher interest rate.
“It’s anywhere from 0.3 per cent to 0.6 per cent higher than what’s in the market rate, but the compromise is there is an interest rate cap at the CPF Ordinary Account level, so that justifies the slight premium,” said Timothy Kua, director of Smartloan.sg.
Kua added: “Especially for people who don’t think they’ll be living in the HDB flat beyond ten years, and they are going to move to another place, upgrade to an EC or a condominium, this package is a quite a no-brainer for them.”
HDB says a residential property loan is a long-term financial commitment and so it advises flat buyers to take a long-term view and assess the monthly loan repayments based on different interest rate scenarios.
It adds that regardless of whether they are taking a loan from HDB or a bank, flat buyers should look at their own financial position carefully and plan prudently before purchasing a flat.