The interest rates for fixed deposits in Singapore are going above 4%, as banks offer deals amid heavy competition for cash.
For instance, OCBC’s flagship 360 savings account now offers 4.08% interest for a minimum placement of S$20,000 over 8 months. This is part of their new Chinese New Year promotion. Meanwhile, non-360 account holders can enjoy a 3.88% interest rate.
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OCBC is also offering Premier Banking and Premier Private clients a 4.18% promotional rate for an 8-month fixed deposit.
“This is the highest Singapore-dollar time deposit interest rate we have offered to customers in recent history,” stated OCBC Bank’s head of deposits Na Kok Peng, adding that the eight-month tenor symbolises prosperity in Chinese. Customers who want more flexibility can go for a shorter tenor.
Meanwhile, UOB has also hiked up its promotional rates this month between 3.55% to 3.95% across varying tenors.
That said, DBS, the largest bank in the country, has largely avoided jumping on the bandwagon. However, it raised its board rates or general fixed deposit rates thrice in 2022.
Early last month, at least two foreign lenders increased their Singapore-dollar fixed deposit rates to more than 4%.
Malaysian bank CIMB currently has a promotion that offers customers a rate of 4.05% per annum for a 9-month fixed deposit. Twelve- and 18-months tenors are at 4.15%. The bank has a minimum placement requirement of S$10,000.
Another Malaysian bank, RHB, now offers a promotional rate of 4.1% for a 24-month deposit. This is for Singapore customers who make a minimum placement of S$20,000 through its mobile app.
“Banks are now more sophisticated institutions that offer a bigger range of products and services that can help to contribute to their profits,” said Professor Lawrence Loh from the National University of Singapore (NUS) Business School, explaining that deposits are usually the most affordable source of funds for banks.
“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,” he added
That said, these adjustments may end this year since central banks, particularly the US Federal Reserve, are expected to pull back their pace of interest rate hikes.
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“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% 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 have observed the demand moving into fixed deposits with longer tenors, as customers want to lock in higher interest rates.
“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,” shared 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,” Chu added.