Mr Chua Kheng Wee Louis: Chairman, in November last year, I asked the Minister for National Development if the funds obtained by HDB to issue housing loans are derived from CPF and whether the Government can consider to unpeg the HDB concessionary interest rate for housing loans from the prevailing CPF Ordinary Account (OA) interest rate and, if not, why not.
As it turns out, the funds obtained by HDB to issue housing loans are from the Development Fund, not CPF. Consequently, it is MOF that provides these funds to HDB and sets them at the prevailing CPF OA rate.
I understand the rationale for the HDB to impose a spread of 0.10% above the OA rate to recover HDB’s cost of administering loans. But the bigger issue is, rather than being dogmatic about pegging the HDB concessionary interest rate at 0.10% above the prevailing CPF OA interest rate, can MOF and, in turn, HDB and MND not make the call to segregate the two distinct roles of the OA savings rate and the HDB loan rate?
As I have raised in my cuts to MOM, the CPF Board’s assessment of the major local banks’ interest rate to be at 0.52% for the period November 2022 to January 2023 appears unrealistically low, given the realities of the deposit environment of the local banks today, and does not reflect economic reality.
Singaporeans are rightly concerned that if the OA rates do somehow rise in future, then there could be higher home loan rates as well, given this peg. However, given that MND has made it abundantly clear that the funds obtained by HDB to issue housing loans are from the Development Fund, not CPF, can we not let the concerns around the home loan peg hold us back from the correct decision of providing for both mortgage stability and certainty and also retirement adequacy for Singaporeans?
Ministry of Manpower
2 March 2023