Goodbye, 4% Fixed Deposits? 3 Reasons Singapore Banks Are Slashing Rates

Back in 2023, a common topic among my money-savvy friends was this: “It’s a great time to lock in a fixed deposit.”

And they weren’t wrong—some banks were offering interest rates as high as 4% then.

If you managed to snag one of those deals, good on you. Fast forward to the second half of 2025, and those golden rates are firmly in the rearview mirror.

Today, the highest fixed deposit rate you’ll find is around 2.45%. Many major banks are offering below 2%, even for longer tenures or larger deposits.

So, what happened?

Let’s unpack the reasons behind the drop and what everyday Singaporeans can do to make smarter money moves in this new rate environment.

 

1. The US Fed is cutting rates, and Singapore follows

Singapore’s falling fixed deposit rates are closely linked to global monetary trends—particularly what’s happening in the United States. The US Federal Reserve is widely expected to make its first interest rate cut in Sep 2025, as inflation cools and economic growth moderates.

Why does this matter to us?

Singapore may not set interest rates directly—our Monetary Authority of Singapore (MAS) manages policy through the exchange rate instead. But our financial system is deeply connected to global flows. As a highly open and trade-driven economy, Singapore’s local interest rates often move in sync with the US Federal Reserve’s decisions.

When the Fed shifts from a “tight” policy stance to a more accommodative one (what economists call “dovish”), global borrowing costs fall. In response, banks in Singapore typically adjust their own savings and deposit product pricing, including fixed deposit returns.

So, as the US enters a lower-rate cycle, it’s no surprise that Singapore’s banks are scaling back promotional deposit rates. We’re already seeing that reflected in July 2025 figures, where 12-month fixed deposit rates at major banks now sit closer to 1.55%–2.45%, far below the 4% highs of 2023.

What you can watch:

• Look out for U.S. Fed announcements, especially after inflation or jobs data
• Terms like “rate cut”, “policy easing” or “dovish stance” often signal downward pressure on deposit returns
• Expect local fixed deposit rates to shift within weeks of US announcements

 

2. Banks don’t need to woo you like they did in 2023

Back in 2022 and 2023, banks were actively pushing fixed deposit promotions to compete for funds. Global central banks were hiking interest rates rapidly to fight inflation, and Singaporeans had plenty of attractive, low-risk options, like Singapore Savings Bonds and Treasury bills, that offered competitive yields.

To stay in the game, banks raised their fixed deposit rates to draw in savers. According to Professor Lawrence Loh from NUS Business School, deposits are among the cheapest sources of funding for banks, which is why they ramped up their promotions during the rate-hike frenzy.

But fast-forward to 2025, and the urgency is gone. Banks now have more liquidity and are no longer chasing deposits with aggressive offers. They’re still focused on profitability—borrowing low, lending high—but they no longer need to entice savers with 4% interest.

What you can watch:

• Fewer fixed deposit promotions is a sign banks aren’t competing as hard for your cash
• Compare returns: if Treasury bills or Singapore Savings Bonds stay above 3%, banks may respond, but only if they need to
  

 

3. The global economy is calming down, and so are rates

Back in 2022 and 2023, fixed deposit rates shot up in response to global chaos: sky-high inflation, supply chain disruptions, energy shocks, and the tail end of COVID-19 recovery. Central banks around the world, including the US Federal Reserve, responded with rapid interest rate hikes to cool things down.

But fast-forward to 2025, and the global economy looks very different.

Inflation is easing, recession risks are lower, and economic growth is stabilising. In short, there’s less need for emergency action—and interest rates are starting to “normalise.”

That’s having a direct impact on fixed deposit returns. As Citibank Singapore’s head of wealth management Lui Chee Ming put it:

“We have seen Singapore dollar interest rates coming down on expectations of an economic slowdown and a pause in the U.S. Fed interest rate hike. This meant that banks generally have reduced their promotional time deposit rates.”

In other words, as the financial environment calms down, so does the need for banks to offer aggressive deposit rates.

What you can watch:

• Global and local inflation reports—lower inflation usually leads to lower interest rates
• News about recession risks easing or growth stabilising—banks tend to reduce rates when the outlook is steady
• Fewer promotional deposit campaigns from banks—another sign that rate normalisation is here

 

So… where should you park your money instead?

Fixed deposits are still a safe, low-risk option. But as of Jul 2025, they may no longer be the best bang for your buck. If you’re looking to earn more without taking on too much risk, it’s worth exploring other instruments that offer similar safety with potentially higher returns or greater flexibility.

Here’s how fixed deposits stack up against 2 of Singapore’s most popular low-risk alternatives:

Product	Avg return (Jul 2025)	Lock-in period	Liquidity	Capital risk
Fixed deposit	1.55%–2.45% p.a.	6–12 months	Low	None (if held to maturity)
T-bills (6 month)	1.77% p.a.	6 months	Moderate	None
SSBs	2.11% p.a. (10-year average)	Flexible (1-month notice)	High	None

Fixed deposits offer capital safety and predictable returns, but require locking up your funds for several months, and many banks now offer less than 2% for common tenures.

Treasury bills (T-bills) offer better short-term returns than many FDs and are backed by the Singapore Government, though they’re less liquid until maturity.

Singapore Savings Bonds (SSBs) offer flexibility and decent long-term returns, especially if you don’t need immediate access to your cash.

If you’re considering options beyond fixed deposits, check out our full guide on Fixed Deposit Alternatives in Singapore—5 Easy, Low-Risk Investments. It covers tools like insurance savings accounts, robo-advisors with guaranteed segments, and how to balance liquidity with yield.

 

Final thoughts: You still have options

It’s clear that fixed deposits aren’t what they used to be, but there’s no need to panic. If you value safety, predictability, and guaranteed returns, fixed deposits can still play a role in your overall savings strategy. The key is to adjust your expectations. Promotional rates are fading, and with global interest rates easing, we’re unlikely to see 4% returns again anytime soon. At the same time, low-risk alternatives like Treasury bills and Singapore Savings Bonds are currently offering more attractive yields with similar levels of capital protection.

Instead of locking everything into a fixed deposit, consider mixing it up. Review any maturing deposits and avoid auto-renewing blindly. Compare options like T-bills, SSBs, or even high-interest savings accounts, especially if you value flexibility. You can also stagger your savings using a laddering strategy to stay liquid while still earning steady returns.

The rate environment may have changed, but with a little planning, your money can still work smart, even in calmer times.

 

This article was first drafted with the help of AI and later reviewed and refined by the author.

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About the author

Vanessa Nah likes her finance articles the way she likes her sitcoms—light-hearted, entertaining, and leaving people knowing a little more about life. She believes money—like life—should be made simple. Outside of work, you’ll find Vanessa attending dance classes, fingerpicking a guitar, and fulfilling her life mission to make her one-eyed cat the most spoiled kitty in the world.

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