Why is the interest rate currently charged by commercial banks lower than HDB’s

[princess_morbucks]

Buyers of HDB flats have the option of taking up a housing loan either from HDB (if they are eligible) or from financial institutions (FIs) regulated by the Monetary Authority of Singapore.

The mortgage loan interest rates and accompanying terms offered by FIs are driven by their business strategies and the overall market conditions. These are dynamic and subject to fluctuations. For instance, it is a common practice for some banks to offer loan packages with low promotional interest rates for the first few years with a lock-in period, after which the interest rate could be revised in line with the prevailing market conditions.

On the other hand, HDB’s concessionary interest rate is pegged at 0.1% above the prevailing CPF interest rate, which currently stands at 2.5%.


- See more at: http://hdbspeaks.sg/fi10/fi10336p.nsf/cc/HDBInterestRate?OpenDocument#sthash.T0Dsa0Jc.7ciY5ZWo.dpuf

[Arcachon]

http://b-i.forbesimg.com/jessecolombo/files/2014/01/singapore-interbank-rate.png

For instance, it is a common practice for some banks to offer loan packages with low promotional interest rates for the first few years with a lock-in period, after which the interest rate could be revised in line with the prevailing market conditions.

Since 2008, now 2014 already 6 years (first few years is how many years)

[Adva181]

But they keep posting record earning. DBS just reported 1B last quarter.

[Arcachon]

If you keep printing money, do you think you can keep on earning.

They are going to build the high speed rail to KL. Guess who are they going to get the loan from. They are not going to get from the 44K guy right.

[Arcachon]

https://www.youtube.com/watch?v=iFDe5kUUyT0

[rook]

HDB borrows the money from the CPF Board to lend to its consumers. So the rate on HDB loans will always be 0.1 pts above the CPF ordinary account.

HDB is not authorised by law to borrow from anyone else....so their only source of funding is the CPF Board. Thats also why HDB can offer long term fixed rates, as CPF is flushed with long term funds.

Other than lending to HDB, CPF is only authorised to invest their money in special gov securities created exclusively from them. The int rates on these bonds are incredibly low (like 0.5%). The govt does a 'transfer' in another way to top up the CPF Board for the shortfall in earnings (CPF pays 2.5-5% int but only earns less than 0.5% int) from the money it earns from its reserves. Govt feels this system safeguards CPF funds far better than allowing CPF to lend its money to risky investors.

[princess_morbucks]

Hdb also issues bonds and notes.
The latest was 7 year notes in march 2014 at 3.008%.

http://www.hdb.gov.sg/fi10/fi10296p.nsf/PressReleases/5E01E6B638F1A3D848257CA7002469DA?OpenDocument

[Komo]

the title should be hdb charging almost twice that of banks for many years already

[teddybear]

Actually, at least now people have a choice: take banks loans at 1% or HDB loan at 2.6%.
Previously, people buy HDB die die can only take loan from HDB at 2.6%!


the title should be hdb charging almost twice that of banks for many years already

[Arcachon]

HDB borrows the money from the CPF Board to lend to its consumers. So the rate on HDB loans will always be 0.1 pts above the CPF ordinary account.

HDB is not authorised by law to borrow from anyone else....so their only source of funding is the CPF Board. Thats also why HDB can offer long term fixed rates, as CPF is flushed with long term funds.

Other than lending to HDB, CPF is only authorised to invest their money in special gov securities created exclusively from them. The int rates on these bonds are incredibly low (like 0.5%). The govt does a 'transfer' in another way to top up the CPF Board for the shortfall in earnings (CPF pays 2.5-5% int but only earns less than 0.5% int) from the money it earns from its reserves. Govt feels this system safeguards CPF funds far better than allowing CPF to lend its money to risky investors.

Interesting, where you get the info "HDB borrows the money from the CPF Board to lend to its consumers."

http://www.hdb.gov.sg/fi10/fi10296p.nsf/PressReleases/A0C1C75C9C8DEA5A48257C22002467B6?OpenDocument

The Housing and Development Board ("HDB") has issued S$1.5 billion, 4-year Fixed Rate Notes (the “Notes”) under its S$22 billion Multicurrency Medium Term Note ("MTN") Programme.

[teddybear]

I thought that is the reason given for why HDB loan is CPF rate + 0.1% = 2.6% now?
Regardless, to be fair, at least now people are given the choice to take private banks loan at 1%+ (much lower than hdb loan of 2.6%), so should not complain................


Interesting, where you get the info "HDB borrows the money from the CPF Board to lend to its consumers."

http://www.hdb.gov.sg/fi10/fi10296p.nsf/PressReleases/A0C1C75C9C8DEA5A48257C22002467B6?OpenDocument

The Housing and Development Board ("HDB") has issued S$1.5 billion, 4-year Fixed Rate Notes (the “Notes”) under its S$22 billion Multicurrency Medium Term Note ("MTN") Programme.