5% risk free return??

Really???!??? 5% risk free return? Where got such good deal? There must be a catch........ Or is there?

I was looking at my CPF accrued interest for the CPF loan to purchase my HDB flat (if u don't know what it is, click here) and i was wondering if i should repay the loan so that the accrued interest don't keep on compounding. I'm sure you all know how terrfying compounding can be if it's working against you.

If i don't repay, the loan amount will keep on compounding at a rate of 2.5% until i sell the flat. That means i will owe myself 2.5% yearly on the loan amount.

On the other hand, if i start to repay the loan, not only do i not owe myself 2.5% yearly on the repayment, CPF will be paying me 2.5% interest yearly on the repayment amount!!! That's a grand total of 5% yearly!!!

Sounds like a good deal. But the sum of money will be locked up in my CPF account until I'm 55.... So there is indeed a catch...