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Medium-Term Interest Rate Stress Test

Last reviewed: · Rate: 4.0% private / 3.0% HDB from 30 Sep 2022.

Current stress rates

  • 4.0% per annum — bank loans for private residential property
  • 3.0% per annum — HDB Concessionary Loans
  • Bank loans for HDB flats use the 4.0% rate (not 3.0%) because they are private-bank loans, even though the property is HDB.

How it shapes your loan

The maximum loan formula sizes your maximum principal based on your binding monthly affordability:

max loan = binding monthly × [1 − (1 + r)^(−n)] / r

where r = stress rate / 12,  n = tenure × 12

Holding the binding monthly payment constant, a higher stress rate gives you a smaller maximum loan, because each dollar of monthly payment buys less principal at a higher interest rate.

Worked example — same income, different stress rate

Binding monthly: $5,000. Tenure: 25 years.

Stress rateMax loanΔ vs 4%
2.6% (pre-2022 HDB)$1,094,000+$148K
3.0% (current HDB)$1,054,000+$108K
3.5% (pre-2022 private)$998,000+$52K
4.0% (current private)$946,000baseline
5.0% (hypothetical)$855,000−$91K

Numbers rounded. Actual computation in the loan calculator.

History of the stress rate

  • Pre-2013 — No formal stress rate; banks used internal credit assessments.
  • 29 June 2013 — TDSR framework introduced with a medium-term rate of 3.5% (private) / 2.6% (HDB).
  • 30 September 2022 — Rate raised to 4.0% / 3.0% following global rate hikes.

Why the stress rate matters more than you think

Many buyers focus on the headline mortgage rate (e.g. "3% fixed for 2 years") without realising that the bank sizes their loan at 4%. The difference can be material:

  • You qualify for a loan based on 4% monthly affordability.
  • You pay at, say, 2.8% in year 1 — comfortably below the stress amount.
  • When the rate resets in year 3 to SORA + 1% (perhaps 4.5%), your actual payment may exceed even the stress test.
  • At that point, you are at the edge of what the bank originally assumed you could afford.

For this reason, conservative buyers leave some buffer below the maximum. Borrowing the absolute maximum at a low promotional rate is leveraged to interest rate risk.

Related guides

Frequently asked questions

What is the medium-term interest rate stress test in Singapore?▾

MAS requires banks to size housing loans not at the actual mortgage rate (which can be very low) but at a 'medium-term interest rate' floor — currently 4.0% per annum for private residential property loans and 3.0% per annum for HDB Concessionary Loans. The stress test ensures borrowers can still service the loan if rates rise over the loan tenure.

When did the 4% / 3% stress rate take effect?▾

30 September 2022. Before that date the stress rate was 3.5% for private and 2.6% for HDB. The increase reflected the rising global interest rate environment in 2022. Even though actual SORA rates have varied since, the medium-term floor has not changed as of 2026.

Does the stress rate affect my actual monthly payment?▾

No. The stress rate only affects how much loan you can be approved for — your maximum loan size. Your actual monthly mortgage payment is based on the package rate you agree with the bank (e.g. SORA + spread, or fixed-rate promo). So your loan amount is sized at 4% but your bills may be lower in practice.

Why use a medium-term rate instead of the actual rate?▾

Mortgages in Singapore are typically 25–30 years long. The promotional rate you start with often resets after 1–3 years to a floating rate. If you size the loan to your initial promo rate of 2.5% but rates rise to 4% mid-tenure, you may struggle to service the loan. The stress rate is a conservative anchor that ensures you can withstand rate cycles.