Fixed Deposits Interest Rate of Banks and Finance Companies in Singapore (Jan 2006 to Dec 2007)

Analysis of Interest Rates from Jan 2006 to Dec 2007

In general, Finance Companies pay slightly higher interest rates on fixed deposits as compared to banks fixed deposits as seen in the chart above. Interest ratse are trending down and this is obvious for the interest rates of 12 month fixed deposits offered by finance companies. These hit a high of 2.09% in May 2006 and dipped into the lowest of 1.48 in April to May 2007.

These are the average of 10 leading banks and finance companies but give an indication of the fixed deposit market in Singapore.

[Source: http://www.mas.gov.sg - MAS Financial Statistics]

 

What can we learn from this?

In general, if you have some investible savings that you wish to put in fixed deposits, you would be able to squeeze out a few basis points or percent in interest if you generally chose finance companies as compared to banks. Of course, individual promotions by banks and finance companies vary so do SHOP AROUND for the best deals at a point in time.

Secondly, do note that this is for 1 year fixed deposits, so once you put the money in, you generally do not wish to touch it or you will either lose some of your accrued interest or be liable for some administrative fees levied by the banks or finance companies. Ask the bank or finance company for its early termination or uplift penalties or charges FIRST BEFORE you place your money with them to avoid liqudity issues.

Thirdly, once you place your 12 month fixed deposits, you lock in the interest for 12 months so even when the bank's new fixed deposit rates go lower, youare still locked in at the prevailing rate at the time of placement. Hence, in times when interest rates are going down, locking in fixed deposit rates is a good idea. However, when interest rates go up, then you may find yourself locked in a lower rate. Therefore, the trick is to spread out your fixed deposits in different tenures to spread the risk of interest rate fluctuations.

While the returns from fixed deposits at current rates will not overcome projected inflation at 4.5 to 5.5%, it is still prudent to have SOME part of your investible savings in such safe instruments to act as a ballast against your riskier portfolio.

Make your money work harder for you!