Banks continue to reduce interest rates on deposited products… “Deposit and loan margins increase further”
Following Hana, Woori, and Nonghyup, Shinhan Bank also decided to cut prices.
Bank deposit-loan interest rate gap likely to widen
Despite the financial authorities’ brakes, the gap between deposit and loan interest rates in the banking sector is expected to widen further. This is because loan interest rates are maintained or increased due to pressure to manage household loans, while market interest rates continue to fall. In particular, the U.S. central bank base interest rate It is expected that deposit interest rates will fall further due to further cuts.
According to the financial sector on the 8th, Shinhan Bank will cut the interest rates on 14 term deposit products by 0.05 to 0.15 percentage points (p). Interest rates for 16 types of savings deposit products are lowered by 0.05 to 0.30 percentage points for each section.
As an exception, the interest rate will be lowered for ‘Shinhan ISA Term Deposit’ from the 16th and for ‘Savings from 1 Month’ from the 29th. The ‘customer interest rate’, which is preferentially applied to actual customers of major term deposits, is planned to be maintained at the current interest rate level.
Previously, Hana Bank lowered the base interest rate for 11 types of deposits, including monthly compound interest savings and 369 term deposits, by 0.05 to 0.25 percentage points from the 1st. SC First Bank also lowered the interest rates on major deposit and savings products by 0.3 to 0.8 percentage points.
Last month, Woori Bank lowered the basic interest rate for ‘Woori First Term Deposit’ (12 months) by 0.2 percentage points from 2.2% to 2.0%, and NH Nonghyup Bank also lowered its main deposit products by 0.25 to 0.55 percentage points.
The problem is that market interest rates may fall further as the U.S. Federal Reserve (Fed) cuts the base interest rate by an additional 0.25% point. Nevertheless, as lending interest rates in the banking sector are not falling, the gap between deposit and loan interest rates in the banking sector is expected to widen. According to the Financial Supervisory Service, the interest rate difference between domestic banks’ household loans (based on new loan amounts) has increased from 0.65%p in July to 0.73%p in August and 0.83%p in September. The difference between household deposit and loan interest rates between October and this month is also expected to have widened compared to September.
An official from a commercial bank said, “Currently, due to policy aspects such as the demand for household loan management, loan interest rates are not falling and the deposit and loan margins in the banking sector are increasing,” but added, “If the base interest rate falls further by next year and the growth in loans slows, the deposit and loan margins will naturally decrease.” explained.