UOB and OCBC cut fixed deposit rate to 2.7%. Where to park your cash now?

What happened?

We are always on the lookout for the highest fixed deposit rate in Singapore, as many of you have asked where is the best place to park your savings.

When we were checking the bank websites for the latest fixed deposit rates, we were surprised to see that UOB has lowered its 6-month and 10-month fixed deposit rates to 2.70% p.a. from 21 June 2023.

This is lower than the rate of 3.10% previously, and the first time the fixed deposit rate has dipped below 3% this year. 

When we went to check the fixed deposit rates offered by other banks, we were likewise surprised to see that OCBC has also lowered its fixed deposit rate to 2.70%. 

For many of us who have been enjoying the high fixed deposit rates offered by the banks over the past year, this would undoubtedly be a disappointment. 

Let us explore why UOB and OCBC might have lowered their fixed deposit interest rates, and what we can do to make our savings work harder. 

Why are banks lowering their fixed deposit rates?

With inflation remaining high and government bond yields staying elevated, it might be a surprise to many that banks have been lowering their fixed deposit rates. 

In case you missed it, there was a report earlier this month that Singapore banks are so flushed with deposits that DBS is loaning the Monetary Authority of Singapore (MAS) S$30 billion. 

DBS CEO Piyush Gupta had said in an analyst call in May that the bank had done so as it is “not finding enough opportunities to put the money to work”.

Data from the MAS shows that total fixed deposits in Singapore have surged to S$858 billion in April 2023 from S$543 billion in May 2022. 

On the other hand, the economic slowdown has led to a lower demand for loans from the banks. 

As a result, banks may see less of a need to dangle high interest rates to attract deposits. 

Are there better fixed deposit alternatives to UOB and OCBC fixed deposit rates?

The good news is that while UOB and OCBC have lowered their fixed deposit interest rates, there are still other banks that are offering higher interest rates.

Amongst the local banks, DBS is offering a 12-month fixed deposit rate of 3.2% for deposits of below S$20,000 (see table below)

Outside of the local banks, the best 6-month and 12-month fixed deposit rates we found were at 3.55% p.a.

If you are looking at leaving your savings in fixed deposits, these options would offer a higher interest rate compared to the fixed deposit rate offered by UOB and OCBC of 2.7%. 

What are the options apart from fixed deposit to earn a higher interest on my savings?

#1 – Treasury Bills

Apart from fixed deposits, many Singaporeans have been putting their money into T-bills to earn a higher interest on their savings.

T-bills are short-term debt backed by the Singapore government, and are seen as a sound way to generate a higher yield for investors. 

For example, the latest cut-off yield on the Singapore 6-month T-bill was at 3.89% p.a., above the fixed deposit rate offered by UOB and OCBC.

However, compared to fixed deposit, T-bills are not covered under the Singapore Deposit Insurance Scheme, and you may suffer capital losses if you sell your T-bills prior to maturity. 

Find out more about T-bills with our comprehensive guide here. 

#2 – Savings account

Apart from T-bills, many savings accounts also offer an interest rate that is above the fixed deposit rate offered by UOB and OCBC now. 

This is because most banks have yet to lower the interest rates on savings accounts, even as fixed deposit rates have come down. 

However, you will not be able to lock-in these attractive interest rates and banks can decide to lower the interest rates offered on savings account too.

Find out more about the best savings accounts with our comprehensive guide here. 

#3 – Money market funds through cash management accounts

Lastly, there has also been more people interested in money market funds through cash management accounts.

These are effectively professional managed funds that will put your cash into low-risk instruments such as bank deposits or short term debt to earn higher interest rates. 

However, money market funds are not capital guaranteed and not insured under the Singapore Deposit Insurance Scheme. 

Find out more about choosing the best cash management accounts with our comprehensive guide here. 

What would Beansprout do?

The surprising cut in fixed deposit rate by UOB and OCBC is a dampener for those of us looking to make our savings work harder to fight inflation. 

However, we can still explore other ways to earn a higher interest rate on our savings. 

This would include looking for other fixed deposit accounts that are still able to offer a higher interest rate compared to UOB and OCBC.

Alternatively, we can also consider investing in the T-bill, which offers a higher interest rate compared to even the best fixed deposit account.

Lastly, we can also explore other options such as savings accounts and cash management accounts. 

To find out how you can earn a higher interest rate on your savings, check out our cash optimiser tool.

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