Fixed Deposit News and Updates: January 2016
Higher Fixed Deposit Rates this Chinese New Year Provide Comfort in Volatile Times
Many banks on the island have upped their fixed deposit rates by providing promotional rates this Chinese New Year reflecting more funding and a far more stringent competition.
In a currently volatile market condition, these offers are meeting the demands from investors who are hesitant to go bargain hunting for better rates. It is not just the banks, even investors have upped a proportion of their portfolios held in cash to 5.4%. This is the third highest percentage seen since 2009 as seen from the Bank of America Merrill Lynch’s Global Fund Manager Survey.
The trend in the rising deposit rates was started by DBS bank when they revised their fixed deposit rates, but as Singapore’s largest retail bank, that they did not revise their rates for the sake of competition.
Even the least aggressive banks have upped their fixed deposit rates for as minimum an amount as SGD 1000. The rates have jumped from 0.15% per annum to .0.2% per annum for a 6 months tenure. Even foreign lenders are seen upping their rates based on the amount and the timeframe. Some banks are even stretching out their loan tenures, extending it for an extra month. Furthermore, priority customers of the banks are getting preferential rates.
There has so far been so dip in the demand for Singapore Dollar Time Deposits as this is still the first quarter of the year where most employees are and will be receiving their bonuses. Additionally, as this year is the Chinese New Year, many banks are offering bonus rewards and seasonal gifts to their customers when they deposit large amounts of money for the Singapore Dollar Time Deposit. Leading banks such as OCBC and UOB also claim to maintain a healthy and stable Fixed Deposit influx. Standard Chartered said that the bank received good response to their FD offers and a slight shift towards midterm tenures. Maybank has always offered its customers attractive rate packages so they do not expect the response to change.
The interest rate environment is further rising and there is a possibility of further raise in the FD rates where borrowers may choose to take shorter tenures of maybe 6 to 12 months and then rotate their FDs with even better rates.
The competition is not expected to get lighter anytime soon. ANZ bank has a different strategy to compete in this rising interest market environment. Hoping that customers are looking beyond the interest rate packages, they are offering a fixed deposit product that will pay the entire interest on the same day of the funds being placed in the account. HSBC Singapore also believes that offering better interest rate packages makes it more attractive to save in an FD because the interest will continue to yield.
However, due to the gradual increase in interest rates and the impact of inflation on the market environment, the real value of deposits and the value of cash are expected to remain slack for the time being, as believed by the head of retail banking and wealth management of HSBC Singapore, Mr Matthew Colebrook.
28th January 2016