The Housing Board should review its policy of pegging the HDB housing loan interest rate at 0.1 percentage point above the Central Provident Fund (CPF) Ordinary Account interest rate.

The HDB housing loan interest rate at 2.6 per cent a year has been much higher than that for bank loans since 2008. Going forward, with the slowdown in global growth due to the Covid-19 pandemic, interest rates are expected to remain low and the HDB housing loan interest rate is likely to remain higher than that for bank loans.

Since January 2003, HDB mortgagors have been able to refinance their loans with banks if they find the banks' rates to be more attractive.

But there are many reasons one would continue to stay with HDB loans. Some fear that banks are not as sympathetic as the HDB when it comes to late payment. Some do not refinance as they are unable to meet the banks' credit assessments.

According to the HDB's audited financial statements for the year ended March 31 last year, total housing loans amounted to

$40.3 billion as of that date, and late payment charges amounted to $31.8 million.

While I do not have the profile of the mortgagors behind the sizeable late payment charges, I suspect the majority are from the lower-income group.

They would have paid more in housing loan interest in the past 12 years, and as a result have less CPF savings for compounding and ultimately less CPF savings for retirement.

It does not make sense to continue charging lower-income Singaporeans above market rates for their housing loans.

The HDB could explore financing the housing loans with bank loans and passing some of the cost savings to the mortgagors.

Incidentally, the HDB, on June 24 this year, issued $800 million, 10-year fixed-rate notes under its $32 billion multi-currency medium-term note programme to finance its development programmes and working capital requirements.

The notes have a coupon of 1.265 per cent a year. Structuring a similar programme to finance the housing loans should not be difficult.

In view of the ever-decreasing leases of HDB flats and impact of Covid-19, revisiting this issue is all the more pertinent now.

Lim Howe Foong