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Banks in Singapore raise fixed deposit rates as demand surges for safe returns

Rising interest rates may be bad news for those taking bank loans, but there is a flip side – rates are also higher now for people who are putting money into fixed deposits.

Banks in Singapore raise fixed deposit rates as demand surges for safe returns

A row of ATMs from various banks at Changi Airport in Singapore. (File photo: iStock)

SINGAPORE: Thinking of parking some money in a fixed deposit? Good news – as interest rates for both loans and savings accounts rise, fixed deposit rates are increasing too.

Several banks in Singapore have rolled out promotions, with this month’s rates going as high as 2.6 per cent for a 12-month fixed deposit and 2.7 per cent for 24 months.

Most lenders require minimum placements of S$20,000 for these promotional rates.

A fixed deposit, otherwise known as a time or term deposit, allows one to earn a guaranteed amount of interest for a lump sum of money deposited with a bank over a specified duration. Unlike regular savings accounts, customers cannot withdraw this money before the so-called “lock-in” duration is over. 

UOB has been among the more aggressive banks, adjusting its fixed-deposit promotions monthly and offering one of the highest rates across a variety of tenor options so far.

For September, the promotional rate for a 10-month fixed deposit is 2.4 per cent, up from last month’s 1.6 per cent. The 12-month rate is 2.6 per cent, likely the highest in town as of Monday (Sep 5) when CNA did a check across various banks.

UOB’s head of group personal financial services Jacquelyn Tan said: “In the current uncertain market environment, we have seen more customers looking for safe havens to protect their wealth."

Another local bank OCBC is offering 2.3 per cent for fixed deposits of 12 months, according to its latest promotional rate released over the weekend.

Changes to its promotions are done “in line with market conditions”, said the bank’s head of deposits Na Kok Peng. “We will continue to monitor the landscape and ensure our interest rates stay competitive.”

Among foreign lenders, RHB has upped its promotional rate for a 24-month fixed deposit to 2.7 per cent per annum from 2.3 per cent. Its 12-month promotion is going at 2.45 per cent, while a six-month deposit earning interest rates of 1.8 per cent is also available for those who prefer a shorter tenor.

Maybank has also rolled out new promotional rates for longer fixed deposit durations this month – 2.35 per cent per annum for an 18-month tenor and 2.4 per cent a year for 24 months. These come on top of existing promotional rates of 2.2 per cent and 2.3 per cent for 12 months and 15 months, respectively.

Such a variety caters to different customer preferences and needs, said a spokesperson who added that Maybank pays interest upfront by the next working day after the fixed deposits are placed.

“We have been receiving very positive response for our various fixed deposit promotion campaigns,” she told CNA.

Also having a promotion this month is Standard Chartered Bank, which is offering 1.8 per cent for a minimum of S$25,000 over 12 months.

The bank also offers a “sustainable” fixed deposit option, which is described as allowing customers to have their capital referenced against the bank’s sustainable loans and projects. This is also currently going at a promotional rate of 1.8 per cent for a 12-month tenor.

A spokesperson said the sustainable time deposit has been “well-received” since its launch in December 2020, with demand mostly from customers who “want to put their money in a purposeful investment to address long-term environmental challenges”.

DBS, Singapore’s largest bank, is the only bank that has not jumped on the bandwagon of promotions so far, but it told CNA that it remains the only bank to have raised board rates or general fixed deposit rates.

“Our Singapore dollar fixed deposits are popular particularly among small retail depositors, and our board rates remain competitive after the recent increase in June, the first amongst local banks,” said the bank’s head of consumer banking in Singapore Jeremy Soo.

“Nonetheless, we are continually reviewing our suite of initiatives and product offerings in order to help our customers to better withstand the inflationary environment across various aspects of their lives.”

Fixed deposit promotions by banks in Singapore
Bank Minimum placement Tenor (months) Promotional rates per annum (as of Sep 5)
UOB S$20,000

10

12

2.4%

2.6%

OCBC S$20,000 12 2.3%
Maybank S$20,000 12
15
18
24
2.2%
2.3%
2.35%
2.4%
RHB S$20,000 6
12
24
1.8%
2.45%
2.7%
Standard Chartered Bank S$25,000 12 1.8%

Source: Various banks' websites

Unsurprisingly as banks dole out juicy deals, demand for fixed deposits has gone up in recent months.

UOB said the bank’s fixed deposit portfolio has grown 16 per cent in the first seven months of this year, while OCBC said placements it received in August grew 60 per cent from July and nearly 150 per cent from June.

“With the rising interest rate environment, customers are seeking higher yields for their deposits, while with higher inflation, customers will see a bigger erosion of their cash value over time,” said OCBC's Mr Na.

“Hence, customers today need to make financial plans to outdo inflation over a longer time horizon – and naturally, demand for time deposits – especially the popular 12-month tenors – has increased.”

Likewise, Standard Chartered has observed a preference for 12-month fixed deposits, compared to longer terms such as 18 or 24 months in a rising interest rate environment.

Over at RHB, demand for fixed deposits has also been “strong” – up about 50 per cent since 2021, said Ms Coreen Kwan, its head of retail bank in Singapore.

“I believe in this volatile market environment, many customers will prefer liquidity to protect their savings. So it’s a win-win situation if they can earn higher interest on their savings while safekeeping their funds.”

WHAT SHOULD DEPOSITORS DO?

While swift increases in borrowing rates have dominated headlines in the previous months as major central banks tighten monetary policy, banks have started moving on the rates they pay on savings of late.

Interest rates for savings accounts got a boost last month, with DBS being the first mover among local banks.

Maybank, RHB and CIMB Bank have also raised the rates for their flagship savings accounts here in a bid to stay competitive.

These revisions are part of a “natural progression with rising loan rates and inflation”, said Maybank Securities’ head of research in Singapore Thilan Wickramasinghe.

“Banks are looking to improve visibility of their cost of funds and duration amidst further expected interest rate hikes,” he said.

Foreign banks are usually more aggressive in jostling for deposits as their smaller deposit bases mean they need to balance liquidity and cost of funding visibility in a rising rate environment. But in light of the stiff competition, domestic banks, which enjoy a large pool of funds from domestic customers and seldom dole out attractive offers, also have to ramp up their game.

“The domestic banks have larger deposit bases however, they will also need to be nimble and respond to competition in order to defend market share,” Mr Wickramasinghe said.

For those mulling whether to take advantage of the promotional rates for fixed deposits, Providend’s senior client adviser Tan Chin Yu said fixed deposits can be useful for short-term needs. 

These include instances when an individual requires “a very high level of safety and cannot afford to have market volatility over a short period of time”, he explained.

But while the higher rates are attractive, Mr Tan recommends comparing fixed deposits with similar low-risk investment options such as the Singapore Savings Bonds.

The Singapore Savings Bonds, issued and fully backed by the Singapore Government, has garnered more attention this year with its steadily rising returns. The 10-year average return rose from just under 2 per cent in January to a record high of 3 per cent in August, although that has since dipped slightly for the bond’s subsequent tranches.

The October issue, for example, is offering a 10-year average return of 2.75 per cent, lower than September’s 2.8 per cent.

Financial experts like Mr Tan have described the Singapore Savings Bonds as “very attractive” due to merits such as flexibility and capital protection. 

That said, due to rising demand, investors may be unable to get the full amount they applied for. The quantity ceiling – applied when applications exceed the issuance size – for the September issue was S$13,000, up from August’s S$9,000 but still below the S$18,000 limit in July.

Given this limit in allotment, those looking to park large amounts of capital should consider other options, said Mr Tan.

Another key consideration for retail investors is the time horizon they have until the money is needed, as fixed deposits or bonds have varying tenor options. Early termination of fixed deposits usually means the depositor will get back only the principal amount.

“You want to make sure that you match the assets towards the liability timeframe well,” said Mr Tan.

It is also worth noting that returns from low-risk investment options generally do not keep pace with inflation. As a result, equities or high-quality longer duration bonds may be more appropriate for those considering longer-term holdings, he said.

Source: CNA/sk(cy)

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