The HDB concessionary interest rate is pegged at 0.1 percentage point above the prevailing CPF interest rate. It is revised every quarterly, in January, April, July and October each year, in line with the revision in the CPF interest rate.
HDB Concessionary Interest Rate:
With effect from 15 October 2006, the computation basis for the HDB market interest rate peg, the Adjustable Rate Mortgage (ARM) Index has been revised. HDB has stopped giving out market rate mortgage loans since 1 Jan 2003.
- Jul 2015 - Sep 2015 : 2.60% p.a.
- Oct 2015 - Dec 2015 : 2.60% p.a.
The revised computation is based on the average of the non-promotional HDB housing loan rates of the three local banks (i.e. DBS(POSB), OCBC and UOB). The HDB market interest rate will continue to be subject to the floor rate of the HDB concessionary interest rate.
Prior to this revision, the ARM Index was computed based on a complex formula involving the prevailing average of the non-promotional HDB housing loan rates of the top six banks and financial institutions, after discarding the highest and lowest rates, and subject to the floor rate of the HDB concessionary interest rate. The top six banks and financial institutions are identified based on their market share of mortgage loans for the purchase of HDB flats.
The HDB market interest rate is reviewed on the 15th day of every month, and any revision will take place on the first day of the second month that follows. For example, if there is a change in the ARM Index, resulting in a corresponding revision of the HDB market interest rate on 15 January 2007, the latter will be effective from 1 March 2007.
This revised computation basis for the ARM Index will apply to existing HDB mortgagors who have been granted HDB market interest rate mortgage loans.
The revision in computation basis will make the ARM Index more transparent and easier for mortgagors and the general public to understand. The current HDB market interest rate is 3.38% per annum.
HDB mortgage interest is computed on a monthly rest basis i.e. interest is imposed monthly based on the outstanding loan balance at the beginning of the month:
* Where R = Interest rate (per annum)
The computation of the outstanding loan balance as at the 1st of the month is shown in the following example:
|Monthly Interest Payable|| = Outstanding loan balance as at 1st of the month x R/12|
|Outstanding Loan Balance|
(as at 1 Sep 2015)
| = Outstanding loan balance (as at 1 Aug 2015)|
+ Interest charged for Aug 2015
- Payment made in Aug 2015
As at 1 Aug 2015, Mr. Tan owes $10,000. The interest rate is 2.6% per annum.
a) The interest for Aug 2015 is: $10,000 x 2.6%/12 = $21.67.
b) Mr. Tan pays $700 in Aug 2015.
c) The outstanding balance as at 1 Sep 2015 is $9,321.67 ($10,000 + $21.67 - $700).
d) The interest for Sep 2015 will be $9,321.67 x 2.6%/12 = $20.20.