Impact of Higher Interest Rate on HDB Mortgage Rates and Loan Repayments

Mr Desmond Choo asked the Minister for National Development with the Federal Reserve of the United States signalling higher and faster interest rate increases in 2023, what is the likely impact on HDB mortgage rates and extent of non-performing loans of HDB dwellers.

The concessionary interest rate that the Housing and Development Board (HDB) charges for its housing loan is pegged at 0.1% above the prevailing CPF Ordinary Account interest rate and is currently at 2.6% per annum.

There are existing credit measures, such as limits on Loan-To-Value ratio and Mortgage Servicing Ratio to encourage prudent borrowing. Since September 2022, alongside measures on housing loans granted by financial institutions (FIs), HDB introduced an interest rate floor to compute eligible loan amounts for housing loans granted by HDB. These measures help to ensure that HDB flat buyers take on loans prudently and are better able to service their loans should interest rates rise further.

Nonetheless, we recognise that some HDB home owners may face financial difficulties when their circumstances change. We encourage such borrowers to reach out for assistance early.

For HDB home owners with housing loans granted by HDB, HDB has various financial assistance measures in place to help them. These include allowing them to temporarily reduce or defer their loan instalments, pay their arrears by instalments within a reasonable period; and/or extend their loan tenure to help reduce their monthly instalments.

For HDB home owners facing difficulties servicing their housing loans from FIs, they are encouraged to approach their lenders early. Government agencies have worked with FIs to establish standardised interventions for HDB home owners, which include potential loan restructuring solutions and early referrals to social service agencies.