Fixed deposit rates inch up above 4% as Singapore banks continue to woo savers

SINGAPORE: Interest rates for fixed deposits in Singapore are inching up above 4 per cent, as banks continue to dish out sweet deals amid a competition for cash.

At OCBC, customers of the bank’s flagship 360 savings account can get a per-annum rate of 4.08 per cent for a minimum placement of S$20,000 over eight months as part of a Chinese New Year promotion rolled out this week. Non-360 customers get a rate of 3.88 per cent.

The bank is also offering its Premier Banking and Premier Private clients a promotional rate of 4.18 per cent for an eight-month fixed deposit.

“This is the highest Singapore-dollar time deposit interest rate we have offered to customers in recent history,” said OCBC Bank's head of deposits Na Kok Peng.

An eight-month tenor was offered for the promotion as the number symbolises prosperity in Chinese, Mr Na said, adding that a shorter tenor also offers customers greater flexibility.

OCBC is the only local bank to have rates for fixed deposits above 4 per cent so far.

UOB, which was among the more aggressive banks with monthly deals last year, has maintained its promotional rates this month at a range of 3.55 to 3.95 per cent across varying tenors.

DBS, Singapore’s largest bank, has largely refrained from jumping on the bandwagon of promotions, instead opting to raise its board rates or general fixed deposit rates twice last year.

At least two foreign lenders also increased their Singapore-dollar fixed deposit rates to more than 4 per cent as early as last month.

A promotion on Malaysian bank CIMB’s Singapore website offers customers a rate of 4.05 per cent per annum for a nine-month fixed deposit. Longer tenors of 12 and 18 months are at 4.15 per cent. The bank has a minimum placement requirement of S$10,000.

At another Malaysian bank RHB, the promotional rate for a 24-month deposit is now at 4.1 per cent for Singapore customers who make a minimum placement of S$20,000 via its mobile app.

These fixed deposit promotions come as global central banks go on a rate-hike race to combat soaring inflation. While lenders make swift adjustments to their borrowing rates, they also have to remain competitive in courting deposits.

Deposits are typically one of the cheapest sources of funds for banks, said Professor Lawrence Loh from the National University of Singapore (NUS) Business School.

“Banks are now more sophisticated institutions that offer a bigger range of products and services that can help to contribute to their profits,” he explained.

“But fundamentally, what banks do is to try to have a surplus using money management – collect as much deposits at the lowest possible rate and lend these funds out at the highest possible rate, so that they earn on the differential.”

Foreign banks are usually more aggressive in the fight for deposits, as their smaller deposit bases mean they need to balance liquidity and cost of funding visibility in a rising rate environment, experts have said. But with stiff competition, domestic banks have caught up with equally or even more attractive rates.

The competition for deposits has also intensified as a slew of low-risk investment products now offer similarly attractive returns, such as the Singapore Savings Bonds and Treasury bills whose yields have risen in tandem with the global rate-hike cycle.

“Consumers are spoilt for choices so fixed deposits have to up their rates to entice consumers away from other fixed income instruments,” said Prof Loh.

Banks have also been raising interest rates on their flagship savings accounts, with the latest move made by UOB last month when it lifted the maximum bonus interest rate on its One account to 7.8 per cent a year.

However, these adjustments to woo savers may come to an end this year with expectations that central banks, in particular the US Federal Reserve, will pull back on their pace of interest rate hikes.

“It’s all a game of expectations,” said Prof Loh, pointing to market forecasts for the Fed’s benchmark rate to go up slightly above 5 per cent this year before seeing a turnaround in 2024 and beyond.

“With this (outlook), fixed deposit rates cannot continue to go up exponentially,” he said.

Lenders told CNA that they have observed demand moving into fixed deposits with longer tenors, as customers seek to lock in the higher interest rates on offer.

“With the potential slowdown of rate hikes in 2023, it will be beneficial for customers who do not have need for their spare funds to lock in the current high interest rates for longer tenor,” said Mr Damian Chu, head of wealth and product management for retail banking at RHB Singapore.

“This is, however, dependent on the customer’s wealth plan and risk profile. It is always prudent to diversify your savings (and) investments to achieve a balance in your wealth portfolio.”