Why 4% fixed deposits are disappearing in Singapore

Singapore’s deposit market is resetting. Promotional rates that brushed 4 percent in 2023 have given way to far leaner offers, with 6 to 12-month tenors now clustering around roughly 1.5 to 2.5 percent, depending on customer segment and bank campaign timing. Even digital challengers that spent the last two years outbidding incumbents are now trimming headline savings rates, which confirms that the cycle has turned. The direction of travel is clear, and it is not about marketing appetite. It is about cost of funds, asset yields, and a central bank stance that has shifted toward easing.

The macro backdrop explains the opening move. Singapore’s monetary policy is set through the exchange rate, not an administered policy rate, yet changes in the slope of the Singapore dollar policy band filter into domestic funding conditions. In January and again in April 2025, the Monetary Authority of Singapore reduced the pace of currency appreciation, a form of easing that aligns with softer growth and moderating core inflation. That easing coincided with a visible step-down in local benchmarks and government bill yields, which anchor short-tenor pricing for banks. Six-month T-bill cut-off yields fell to about 1.59 percent in the August 14 auction. When the sovereign’s risk-free curve sinks, deposit campaigns follow.

Reason one is simple market plumbing. Benchmarks and reference rates have slid as system liquidity improved, which lowers the marginal cost of raising dollars in Singapore. Analysts tracking the Singapore dollar policy band note that domestic liquidity has been ample, with SORA easing in recent months. That shows up immediately in deposit pricing, since banks do not need to pay up to hit liquidity coverage targets when wholesale and retail funding are both comfortable. In other words, cheaper wholesale money and a softer government curve reduce the need for expensive retail campaigns.

Reason two is margin management. As loans reprice lower more quickly than funding costs fall, every extra basis point paid on deposits squeezes net interest margin. Across the big three banks, NIM compression has already arrived, and management guidance acknowledges more of the same through 2025. DBS reported a 19 basis point year-on-year NIM decline in the first half to about 2.61 percent. UOB’s second quarter NIM slipped to around 1.91 percent with full-year guidance in the 1.85 to 1.90 percent range. OCBC’s first half NIM declined to roughly 1.98 percent. In that environment, rich fixed deposit promotions are a luxury, not a strategy. Cutting deposit rates is the fastest way to defend spread while credit demand and asset yields reset.

Reason three is competitive recalibration. Two anchors that previously forced banks to bid for deposits have faded. First, T-bills and Singapore Savings Bonds no longer compel a defensive response. With six-month T-bills sitting near 1.59 percent and the August SSB offer implying roughly 1.8 to 2.3 percent annualized depending on holding horizon, banks do not need to match 2023’s 4 percent to retain sticky balances. Second, digital banks that initially set a high bar for savings promos are stepping down rates, which eases the promotional arms race and allows incumbents to align offers with balance sheet needs rather than market optics. As challengers normalize, incumbents can normalize too.

The result is a market that looks less like a rate war and more like balance sheet engineering. Deposit growth has been healthy even without outsized coupons. DBS recorded mid-single-digit deposit growth in the first half, while peers have stressed strong liquidity buffers, including liquidity coverage ratios well above regulatory floors. When buffers are comfortable and flows are steady, paying 4 percent to acquire low-beta deposits becomes hard to justify. Banks can take pricing down, maintain funding stability, and reallocate commercial energy toward fee income and wealth businesses that are showing more resilient momentum in the current cycle.

There is also a strategic discipline at play. The cycle that delivered 4 percent fixed deposits was never a new normal. It was an artefact of post-pandemic inflation dynamics, imported global monetary tightening, and a brief period of intense customer acquisition by new entrants. As those forces reverse, pricing power shifts back to the liability side of the balance sheet, particularly in a system where the exchange rate, not a domestic policy rate, does the heavy lifting. The earlier the banks restore pricing discipline, the more optionality they retain if growth slows further or if credit costs rise later in the year.

Could the direction change again. Only if the anchors move. A sharp rebound in T-bill yields, a surprise tightening in the Singapore dollar policy stance, or an aggressive re-acceleration of promotional bidding by new entrants would force banks to revisit retail deposit pricing. Without those catalysts, the base case is continued normalization around the sovereign curve and interbank benchmarks rather than a new bidding cycle. The fact that digital players have joined incumbents in cutting front-book rates suggests the competitive equilibrium has already shifted.

For savers, the headline is unambiguous. The 4 percent era has closed. For bank operators and strategists, the message is more interesting. Singapore fixed deposit rates are now a signal of policy stance, system liquidity, and NIM protection, not a marketing contest. When the sovereign curve and benchmarks drift lower, liability pricing adjusts first, and it adjusts quietly. That is what is happening now.

What this says about the market. The deposit cycle has re-entered a fundamentals phase. Pricing is being set by the curve and by balance sheet needs, not by a race for balances. In this phase, deposit discipline is not a defensive move. It is how banks preserve spread capacity while they pivot toward fee engines and wait for loan demand to recover. Strategy leaders should read the cuts not as retreat but as the system returning to form.