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Good news! Interest rates might have gone up but HDB concessionary rate for home loans remains unchanged

sgmatters.com good news interest rates might have gone up by hdb concessionary rate for home loans remains unchanged good news interest rates might have gone up by hdb concessionary rate for home loan

Have you heard of the CPF floor interest rates? Floor rates are the legislated minimum interest rates guaranteed to our CPF monies. It ensures that interest earned by our money in our CPF accounts does not go below the floor rates.

The floor rate for savings in the Ordinary Account is 2.5%. And for savings in the Special and MediSave accounts, it is 4%.

Savings in the Ordinary Account earn the 3-month average of major local banks’ interest rates. But when the 3-month average is lower than the floor rate for Ordinary Account savings, then the legislated minimum interest of 2.5% per annum will apply instead.

Savings in the Special and MediSave accounts earn the 12-month average yield of 10-year Singapore Government Securities (10YSGS) plus 1%, subject to the current floor interest rate of 4% per annum.

Despite the recent rise in interest rates, the pegged Ordinary Account (OA) and Special and MediSave Account (SMA) interest rates remain below the OA and SMA floor rates of 2.5% and 4% respectively.

The CPF Board will therefore maintain the floor rates of 2.5% and 4% respectively, for the OA and SMA for the first quarter of 2023.

For members below 55

This means that CPF members below 55 years old will continue to earn interest rates of up to 3.5% per annum on their OA monies and up to 5% per annum on their SMA monies.

These interest rates include an extra 1% interest paid on the first $60,000 of members’ combined balances (capped at $20,000 for OA). 

For members 55 and above

For members who are 55 and above, the Government pays an extra 2% interest on the first $30,000 of their combined balances (capped at $20,000 for OA) and an additional 1% on the next $30,000.

This means that members aged 55 and above earn up to 6% interest per annum on their retirement balances.

The extra interest paid to CPF members is part of the Government’s efforts to enhance the retirement savings of CPF members.

Good news for home owners

The concessionary interest rate for HDB housing loans is pegged at 0.1% above the OA interest rate.

As the OA interest rate will be maintained at 2.5% per annum for the first quarter of 2023, the concessionary interest rate for HDB housing loans will remain unchanged at 2.6% per annum.

Basic Healthcare Sum for 2023

The Basic Healthcare Sum (“BHS”) is the estimated savings required for basic subsidised healthcare needs in old age. It is adjusted yearly for members below age 65 to keep pace with the growth in MediSave use.

The BHS is the cap applied to the MediSave Account (MA). MediSave contributions in excess of a member’s BHS will be automatically transferred to his or her other CPF accounts.

CPF members who have less than the BHS are not required to top up their MA and will still be able to withdraw from their MA to pay for approved medical expenses.

Once members reach age 65, their BHS will be fixed for the rest of their lives.

From 1 January 2023,

    1. For members below 65 years old, their BHS will be raised from $66,000 to $68,500. 
    2. For members who turn 65 years old in 2023, their BHS will be fixed at $68,500 and will not change thereafter.

For members aged 66 years and above in 2023, their cohort BHS has already been fixed and will remain unchanged.

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