▲ Bank of Korea Governor Joo-yeol Lee presides over a meeting of the Monetary Policy Committee held at the Bank of Korea in Jung-gu, Seoul on the morning of the 14th. (Bank of Korea)
As the Bank of Korea’s base rate rose from 1.0% to 1.25%, commercial banks began raising interest rates one after another.
Borrowers who have already reached the limit of their repayment ability (invest by attracting their souls) and ‘debt investment (invest with debt)’ are expected to be hit directly.
According to the financial industry on the 16th, starting with Shinhan Bank and Woori Bank on the 17th, commercial banks such as KB Kookmin, Hana, and Nonghyup Bank will raise interest rates for deposits and savings accounts.
First, Shinhan Bank will raise interest rates for 36 types of time deposits and savings accounts by up to 0.40 percentage points (p). With this interest rate hike, the representative product, ‘Hello, Nice to meet you,’ will increase the interest rate to a maximum of 4.4% per annum with a one-year maturity, and ‘Shinhan Merchant Swing Savings Savings’, a product that helps self-employed people raise large amounts of money, will increase the interest rate to a maximum of 3.0% per annum with a one-year maturity. .
The one-year maturity ‘Shinhan My Home Savings Savings Rate’ will be raised by 0.4 percentage points to a maximum of 2.6%. The interest rate for the 5-year ‘Future Design Krevas Pension Deposit’ for senior customers is increased by 0.3 percentage point to 2.15% per annum.
A Shinhan Bank official said, “In line with the Bank of Korea’s base rate hike and market interest rate rise, we have also increased the interest rates on deposits and savings accounts for customers quickly.”
Woori Bank will also raise interest rates for 18 time deposits and 20 savings accounts by 0.1 to 0.3 percentage points. The interest rate for ‘Woori Super Term Deposit’ will increase from 1.45% to 1.7% per annum, ‘Won Savings’ from 2.5% to 2.6% per annum, and ‘Shrug Savings’ from 2.05% to 2.35% per annum.
KB Kookmin, Hana, and Nonghyup Bank are also considering raising interest rates for deposits and savings accounts, and loan rates are expected to rise sequentially. An official of NH Nonghyup Bank said, “The receiving rate plans to reflect the base rate increase within one week.
An official from a commercial bank said, “I interpret the trend of raising interest rates to be solidified in the future.” “At the same time, it is expected that the loan interest rate will be adjusted according to the household loan management plan,” he added.
(Data source = Federation of Banks)
Since the Bank of Korea’s first base rate hike at the end of August last year, the interest rates on household loans, including mortgages and jeonse loans, have risen by about 1 percentage point.
The floating rate main loan interest rate of the five major commercial banks increased by 0.88 percentage points from 2.62 to 4.19% at the end of August last year to 3.57 to 5.07% (as of the 14th of last year) based on the upper end of the interest rate. The interest rate on the hybrid (five-year fixed rate and then variable rate) main loan loan also rose 1.09 percentage points during the same period, with the highest interest rate entering the mid-5% range.
This means that the increase in the loan interest rate was larger than the increase in the base interest rate (0.5%) during this period. If you borrowed 100 million won on a variable interest rate condition, the interest you have to pay per year increases by 1 million won if the interest rate rises by 1 percentage point.
Following this hike, the Bank of Korea is predicting at least one additional rate hike, so the rise in lending rates is expected to be steeper. This is why there is a forecast that the interest rate of the main loan to be in the range of 6% is not far away.
The industry predicts that the new COFIX (Funding Cost Index) for December of last year announced by the Federation of Banks on the 17th will also increase significantly. This is because commercial banks drastically raised interest rates on deposits and savings accounts due to consecutive base rate hikes in August and November of last year.
It was already 1.55% as of the end of November last year, up 0.26 percentage points from the previous month. This is the highest number among the Cofixes announced last year. The following month, the interest rates on the variable rate main loan and the jeonse loan rose together.
The effect of the base rate hike on the 14th will be reflected from the Cofix to be announced next month, and the interest rate on bank bonds is highly likely to fluctuate.
A rise in interest rates ultimately leads to an increase in borrowers’ burden. Floating rate borrowers, who are directly affected by the current rate hike, are likely to be hit hard. With interest rate hikes since last year, the burden on floating rate borrowers continues to grow.
It is expected that floating rate borrowers will consider changing to a fixed rate or requesting a lower interest rate in order to reduce their increased interest burden. The right to request a rate cut refers to the right to request a rate cut from a financial company if the credit status of a consumer using a loan has improved.
Anyone can apply if their credit status improves after a loan, such as employment/turnover, promotion, income increase, credit rating increase, asset increase, debt reduction, etc. This applies to both credit and mortgage loans, as well as personal and corporate loans. However, products handled according to the predetermined interest rate standards, such as policy fund loans and loans secured by deposits and savings accounts, are excluded.
An official from the financial sector explained, “The increase in the base rate will be reflected in the loan rate gradually,” and “the burden on borrowers with variable interest rates will increase.”
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