SSB rate at new low; savings, FD, mortgage rates also slide

Tue, May 05, 2020 - 5:50 AM
UPDATED Tue, May 05, 2020 - 10:03 AM

Tay Peck Gek


FALLING interest rates have cascaded down to both deposit and lending products - from Singapore Savings Bonds (SSB), fixed deposits (FD) and home loans to savings deposits.

The latest issue of SSB opened on Monday with the lowest rates the fixed income instrument has ever offered since its launch in 2015. The June edition offers an interest rate of 0.57 per cent for the first year and an average rate of 1.05 per cent per annum over the 10-year holding period.

This average rate that an SSB investor will get by staying invested for 10 years pales in comparison to the 1.3 per cent per annum offered by ICBC Singapore for one-year fixed deposits of at least S$500 - the same minimum amount required for SSB.

iFast fixed income analyst Ang Chung Yuh noted that SSB can be redeemed any time with no penalty and no market risk. Also, the obligor of SSB is the Singapore government, which has a higher creditworthiness than banks.

SSB's rock-bottom rates come amid a declining interest rate environment. Mr Ang told The Business Times that SSB rates are based on Singapore Government Securities yields, and these bonds have continued to hit new record lows in the past few months.

He noted that the 10-year Singapore government bond yields have fallen from 1.73 per cent at the end of 2019 to 1.27 per cent as at end-March, and then 0.89 per cent at the end of April. "The fall in SSB interest rates is a natural consequence of global central banks easing monetary policy."

Major central banks around the world have slashed policy rates to prop up sluggish economies that have been paralysed by lockdowns in attempts to stem the spread of the novel coronavirus.

The majority of the 10 financial institutions (FIs) BT polled have also dropped their rates for 12-month tenor, S$20,000 fixed deposits vis-a-vis April's. For instance, DBS has cut its rate from 1.4 per cent per annum to 1.15 per cent, and this rate is not even offered to new customers. Only existing customers can take advantage of this rate to roll over their FDs.

BT understands that some banks are concerned about the uncertain interest rate outlook for the longer term, given that there is little visibility on when the pandemic will blow over.

HSBC Bank Singapore was the only one out of the polled FIs that bucked the downward trend observed among its peers. The bank's head of retail products, Ranojoy Dutta, said: "We review our product offerings regularly. This is to ensure that we continue to support our customers and deliver value with the right rate and tenure options that will meet their individual needs."

In tandem with the lower FD rates, DBS' home loan customers on floating-rate mortgages will enjoy lower rates by June 4, as these rates are pegged to FD rates which have come down. Some mortgagors started paying lower rates from Monday after the bank cut some of its FD rates in April.

Over at OCBC Bank, its mortgage floating and fixed rates have fallen by up to 10 basis points in the recent two months, said its head of home loans, Lee Mei Ling.

UOB has maintained its home loan rates for now, but it will continue to review the offerings to ensure they remain competitive and meet the needs of homeowners, said Jacquelyn Tan, head of Singapore personal financial services at UOB.

Savings that are not locked in for a fixed period, however, have not been spared the axe as well. DBS dropped the rates to 0.05 per cent per annum for larger amounts across several Singapore dollar deposit accounts on Monday.

Similarly at OCBC Bank, interest rates for some of its account types will be further lowered in June, following a round of reduction in May. The bank's head of deposits Gregory Cher cited "the weakened yield environment" as the reason behind the cuts.

But there are no changes for UOB savings rates, other than the one announced earlier for its flagship deposit account.