Fixed deposit rates go up as banks and finance companies jostle for market share

Local lenders, as well as foreign banks, have been offering raised fixed deposit rates. ST PHOTO: CHONG JUN LIANG

SINGAPORE - Interest rates for fixed deposits are moving up and are now at the same or even higher than pre-Covid-19 levels amid an increasingly competitive market for lenders.

UOB and Hong Leong Finance are the latest to lift rates.

UOB is increasing promotional rates for its Singapore dollar fixed deposits from Thursday with a minimum placement of $20,000.

The rate for the 10-month tenor will be raised by 0.8 percentage points to 2.4 per cent while the 12-month tenor stays at the prevailing promotional rate of 2.6 per cent a year. Ms Jacquelyn Tan, head of group personal financial services at UOB, said the bank recorded a 16 per cent increase in its fixed deposit portfolio for the first seven months of this year.

Hong Leong Finance also announced a special fixed deposit promotion for the Mid-Autumn Festival but customers have to put the cash with the finance company for 15 months.

Balances of $10,000 to less than $50,000 earn 2.4 per cent, while those from $50,000 to less than $200,000 reap 2.43 per cent. Balances from $200,000 onwards get 2.45 per cent.

In the meantime, OCBC has removed the 24-month fixed deposit and now only offers a fixed deposit with a 12-month tenor.

The promotional rate for this 12-month fixed deposit is 2 per cent and depositors have to put in a minimum of $20,000.

DBS does not offer promotional rates but it raised its general fixed deposit rates - known as board rates - in June and refreshes them regularly.

Fixed deposit rates for balances between $1,000 and $19,999 are 0.15 per cent for a three-month tenor and 0.85 per cent for an eight-month tenor as at Aug 31.

Ms Huong Tran, head of consumer deposits and transactional payments at DBS, said the bank stopped taking fixed deposits with tenors beyond eight months because of the uncertainty of longer-end tenors.

In contrast, a shorter tenor allows the bank to adjust its rates more easily in line with changes in the interest rate environment.

DBS is the only bank in Singapore to increase its board rates, unlike other lenders, which have been dishing out promotional rates.

The foreign banks have also offered promotional fixed deposit rates that are comparable or higher than those from the local lenders.

For instance, for a minimum placement of $5,000, customers can get 2.35 per cent if they put their money in a fixed deposit with the Bank of China (Singapore) for 12 months.

They can get as much as 2.5 per cent if they deposit cash for 24 months.

The MayBank iSAVvy time deposit gives a return of 2.2 per cent for a 12-month tenor and a minimum placement of $25,000.

With so many fixed deposits on offer and at so many tenors, how is a depositor to choose?

Mr Tan Chin Yu, senior client adviser at Providend, said an individual should look at the tenor he is comfortable with.

Mr Victor Wong, director of wealth management at Financial Alliance, said fixed deposits are not liquid and early termination usually means the depositor will get back only the principal without some of the interest.

Customers should also ensure the financial institution is in the Deposit Insurance Scheme.

The Singapore Deposit Insurance Corporation will pay out up to $75,000 per depositor per institution if the bank or finance company goes under.

Thus, an individual with a larger amount than $75,000 could spread his funds across a few banks, said Mr Wong.

He added that when fixed deposits on a promotional rate mature, they will automatically be renewed at a lower rate.

Mr Wong advised bank customers with multiple deposits to monitor the maturity dates so that they can withdraw the money or find another option before their fixed deposits are renewed at lower rates.

Correction note: An earlier version of the story stated that OCBC had fixed deposits with tenors of 12 and 24 months. OCBC has clarified that they are removing the 24-month fixed deposit as of Sept 1. The earlier version also stated that the promotional rate for a minimum placement of $5,000 is 2 per cent for a 12-month tenor. OCBC has clarified that the $5,000 minimum requirement stated in its website applies to renewal of fixed deposits at board rates, which are lower.

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