Fixed Deposit Rates and Singapore Savings Bond

Recently I was looking around for options to park a portion of cash from my corporate account to earn some interest.

Instead of letting my funds 'sit' idly in the existing current account which doesn't gives any interest, I prefer to let them work harder and make additional 'friends'. The returns can be small but must be practically risk-free.

Having said that, options are not much. The first thing that comes to mind are interest-bearing current accounts and corporate fixed deposits (FD).

I went online to do some comparison work. Surprisingly some foreign banks are offering pretty attractive interest rates for their current accounts and FDs.

Some of the offers are for personal deposit only but I will list it down as well for readers' reference.

For ICBC FD

Validity: Till further notice
Caveat: Not sure whether it's applicable for corporate FD.

For ICBC FD + Current Account

Validity: 31st Oct 2018

For RHB FD

Validity: 31st Oct 2018
Caveat: For personal FD only. Not for corporate.

For CIMB FD

Validity: 31st Oct 2018
Caveat: For personal FD only. Not for corporate. 

For CIMB FD + Current Account

Validity: Till further notice
Caveat: For corporate FD only. Not for personal.

12 months FD only Rate: 1.65% P.A.
12 months FD + Current Account Rate: 1.83% P.A. (FD) + 0.78% P.A. (Current Account, Min. S$30k)

I also did a comparison with the upcoming Singapore Savings Bond (SSB) with issue date of 1st Nov 2018.

Again it's not applicable for corporate but just sharing for reference sake.

The offerings from CIMB actually compare favourably with the SSB if I take up the FD + current account bundle. However that might affect my cash flow since a minimum of S$30k has to be maintained in the account on top of the amount that I want to put into the FD.

Readers with extra personal cash wanting to park somewhere for risk-free interest, you might want to consider the FD offered by CIMB. At 1.84% interest, it is slightly higher than the 1.80% from the SSB.

However if you are going for longer tenor like 2 years and more, the SSB is still a more attractive option.

OCBC 360 vs UOB One - Latest Comparison

So you guys probably already know that OCBC has changed the terms and conditions of its 360 savings account again.

If memory serves me well, this is the 2nd time they have changed those conditions.

Initially it was 1% interest P.A. for each of its original 3 categories. After that it was changed to 0.5% for couple of the categories. Now it's down to 0.3%.

While it is not totally unexpected, it is still disappointing nonetheless.

With the new conditions (interest rates) in place from 1st April 2017 onwards, it would serves us well if we can do an apple to apple comparison with the next closest saving account to see which benefits us most.

With that in mind I did a comparison between the OCBC 360 account and UOB One account.

First off, the difference between the existing OCBC 360 conditions and the new conditions from April onwards.

As you can see, interest rate has dropped in two of the categories while new condition has been set.

Personally I am able to get 2.25% + 1% on incremental saving amount on current conditions. Once the new scheme kicks in, realistically I should be able to get 1.85%.

Now, the interest rates offered by UOB One account.

Interest offered by One account is slightly different in the sense that the rates are on step up basis.

So which is the better account in terms of interest rate for the man in the street?

For this question we do a case study based on two scenarios as follows.

Case Study 1:

For the average Joe who maintains $20,000 in his account every month and is able to get 1.85% from his OCBC 360 account from April 17 onwards or 2.05% from his UOB One account.

On top of that he also spends at least $600 on his credit card every month. Since the cash rebate for OCBC 365 card is mostly between 3 - 6%, we use a mid figure of 4% for our average Joe.

Case Study 2:

For the richer average Joe who maintains $50,000 in his account every month and is able to get 1.85% from his OCBC 360 account from April 17 onwards or 3.38% from his UOB One account.

On top of that he also spends at least $600 on his credit card every month. Since the cash rebate for OCBC 365 card is mostly between 3 - 6%, we use a mid figure of 4% for our average Joe.

Case Study 3:

For the even richer average Joe who maintains $70,000 in his account every month and is able to get 1.85% from his OCBC 360 account from April 17 onwards or 3.38% from his UOB One account.

On top of that he also spends at least $600 on his credit card every month. Since the cash rebate for OCBC 365 card is mostly between 3 - 6%, we use a mid figure of 4% for our average Joe.

In conclusion, you can see that with a larger savings amount up to $50,000, the UOB One account offers a better deal than OCBC 360 account.

However if your savings amount starts to exceeds $50,000 you might want to take a closer look at the OCBC 360 account since the interest rates are valid up to $70,000 whereas UOB One account only offers 0.05% base interest for savings above $50,000.

(Thanks to reader Vince Chew who pointed this out)

If you are like the average Joe in our case study who maintains a lower amount in his savings, OCBC 360 is probably better for you.

For myself, I will still stick with my OCBC 360 account FOR NOW as most of my funds are currently in investments.

It's not worth the hassle for me to switch my Giro billings.

Furthermore UOB, like other banks, can change the conditions for their UOB One account anytime. So I will adopt a wait and see attitude first.

Property Loan Refinancing

Like many first-time HDB flat owners, my wife and I took up the HDB loan when we got our unit more than 3 years ago.

It's so convenient - we could settle it right at HDB hub when we were there. Furthermore we have so many other things to settle.

One and a half years down the road after we collected our keys, we began to look closer at the home loans offered by the banks. Even then, we were only looking casually.

Refinancing is very far back in our minds... Until one fine day when we decided to do a simple spreadsheet to see how much we can save...

For our HDB loan, my wife and I were paying $300+ a month each from our CPF. No cash involved. Repayment period was spread over 25 years.

At that time POSB was offering a home loan which was quite attractive in my opinion. The interest rate of the home loan is based on a fixed 1.58% + the prevailing fixed deposit home rate (FHR) up to the prevailing interest rate under CPF OA.

Simply said, the POSB interest rate will only go up to a maximum of 2.5% which is lower than the HDB's loan interest rate of 2.6%.

So wifey and I went to a branch on a weekend to find out more and the rest as they said, is history.

We refinanced with POSB home loan with a repayment period of 8 years. Why 8 years?

Because POSB guaranteed the interest rate to be lower than HDB's for the first 8 years only.

At the time of our refinancing, the FHR was 0.4%. So our interest rate was 1.98%.

After the refinance, we are now paying about $750 a month each. The repayments are still coming from our CPF accounts without touching our cash.

So what's our savings achieved from this action?

Remember I mentioned about a comparison spreadsheet we did to estimate the savings?

To make the comparison simpler, we used a total monthly repayment amount of $1,500 for both cases and monthly interest rates are set as 2.6% and 1.98% for the HDB loan and POSB loan respectively.

The savings achieved is about $4,400.

If compared to our original monthly HDB loan repayment amount of $600+ and repayment balanced period of 23.5 years, the savings would be even greater at $34,300!

In other words by switching our original HDB loan to the bank loan, we saved $34,300.

What led us to go for the refinancing with POSB:

1) Guaranteed lower interest rate than HDB's for the first 8 years.

2) Legal fee of $1,600 and valuation fee of $200 were reimbursed to us by the bank. (Although we have to pay the $14 GST on the valuation fee)

Cons:

1) Need to make time for the valuer to come to your house for a valuation.

2) Need to go to the law firm to sign some documents on a week day. But hey, just take a day's leave and treat it as a break to enjoy the day.

All these to us are minor inconveniences.

More importantly, remember the bank loan's interest rate is subject to change depending on the prevailing FHR.

At this point of writing our rate is 2.18%. Still lower than the 2.6% from HDB.

Another important point to note is that you must do your own calculation to see how much you can afford to pay from both of your monthly CPF contributions while leaving some portion in your CPF accounts as a buffer for rainy days.

Whether it's worth to refinance or not, remember to do your homework to help yourself make a better decision.

Last but not least, Happy Lunar New Year to everyone!