[이코노믹리뷰=박창민 기자] As the Bank of Korea raised the base rate last week, commercial banks are also raising interest rates on deposits and savings accounts. However, the effect of the base rate hike on loan interest rates is expected to seep in more quickly, increasing the burden of repayment of interest.
Banks raise interest rates on savings and savings accounts
According to the banking industry on the 18th, Hana Bank will sequentially raise interest rates for a total of 22 deposits and savings products, including representative deposits and savings-type deposits, by up to 0.30 percentage points from today. On the 14th, the Bank of Korea raised the key interest rate by 0.25%.
As a result, interest rates for ‘Payroll Hana monthly compounded interest savings’ and ‘main transaction one monthly compounded interest savings’ will rise from the highest of 2.45% to the highest 2.70% based on the one-year maturity period, and from the highest of 2.7% to the highest 3.00% based on the 3-year maturity. In the case of ‘My Mom Savings Savings’, which has a relatively high limit to support low-income earners, the basic interest rate for flat-rate products for 13 months or more is increased by 0.30 percentage points. For the remaining 15 types of deposit products, the basic interest rate will increase by 0.25 percentage points from the 20th.
Other commercial banks have also raised interest rates on deposits.
From the 17th, Shinhan Bank raised interest rates on fixed deposits and 36 products by up to 0.40 percentage points. The representative product ‘Hello, Nice to meet you’ has a one-year maturity interest rate of up to 4.4% per annum. The one-year maturity interest rate of the ‘Shinhan Franchise Swing Savings Savings Account’, which helps the self-employed to raise large sums of money, has also risen to a maximum of 3.00% per annum. The maximum interest rate for ‘Shinhan My Home Savings Savings’ was changed to 2.6% per annum, and the maximum interest rate for ‘Future Design Crevass Pension Deposit’ for senior customers was raised to 2.15% per annum.
Woori Bank also decided to raise interest rates on deposits and savings accounts from the same day. From the 17th, Woori Bank raised the interest rates for 18 time deposits and 20 fixed deposits by 0.10 to 0.30 percentage points. The interest rate for ‘WON Savings Savings’, which is one-year maturity, has risen to a maximum of 2.4% per annum, and for ‘ESG Savings Savings’, the interest rate has risen to a maximum of 1.55% based on one-year maturity. The interest rate for the ‘Super Term Deposit’ was also changed from 1.45% per annum to 1.70% based on the 3-year maturity.
KB Kookmin Bank and NH Nonghyup Bank are also considering raising interest rates for deposits and savings accounts.
Loan interest rates rise faster… “We need to prepare for rising interest rates.”
The interest rate on deposits and savings accounts is rising due to the base rate hike, but the level of loan interest rates is expected to rise rapidly as a reward. In general, the effect of changes in the base interest rate is reflected in the loan interest rate faster than the deposit rate. This is because the proportion of variable rate products is higher in loan products than deposit products.
As of this day, the interest rates on KB Kookmin, Shinhan, Hana, and Woori Bank’s jeonse loans stood at 3.47 to 4.87 percent. The new transaction amount is based on the COFIX (Funding Cost Index) 6 months. In August of last year, when the Bank of Korea raised the interest rate after turning from the 15-month period of freezing the base rate, the interest rates on their jeonse loans were between 2.59% and 3.99%. This means that the interest rate on the Jeonse loan has risen by nearly 1 percentage point in six months.
As of December of last year, announced by the Federation of Banks on the same day, Cofix was 1.69%, up 0.14 percentage points from the previous month. This is the highest in 30 months. The new Cofix will be reflected from tomorrow. Woori Bank’s floating rate main loan interest rate, which will be applied on the 18th, is 4.95% to 4.95% per annum. On the 17th, Kookmin Bank also changed the floating rate type main loan interest rate from 3.57 to 5.07 percent per annum to 3.71 to 5.21 percent per annum. As the BOK is announcing an additional rate hike this year, the 3% range of mortgage products is also expected to gradually disappear.
COFIX (Funding Cost Index) is the weighted average interest rate for funds raised by eight domestic banks (Kookmin, Shinhan, Hana, Woori, Enterprise, Nonghyup, SC Jeil, and Citibank Korea). It is the standard for variable interest rates. The increase in Cofix means that the interest rate required to secure financial resources for issuing loan products has risen, which means that the burden of procurement costs has become larger than before.
Loan interest rates are rising and repayment burden is increasing, but loan demand in the first quarter of this year is expected to increase even more than at the end of last year. Banks are also planning to loosen the lock on loans and lower the threshold somewhat as the total amount of household debt has also been reset (reset) as the year changes.
Looking at the household loan demand in the ‘Financial Institutions Loan Behavior Survey Results’ released by the BOK on the same day, the demand for housing loans rose from -18 in the fourth quarter of last year to 0 in the first quarter of this year. General loans were expected to remain flat from -9 to 0. The loan behavior survey is a statistic calculated as an index between 100 and -100 by weighted average of responses to credit risk, loan attitudes from financial institutions, and loan demand. If the loan attitude index is positive (+), it means that more banks said they would ease the loan review, and if it was negative (-), they said that they would strengthen it.
An official from the BOK said, “The bank’s lending attitude toward household loans has been significantly strengthened for the second straight quarter in accordance with the household loan management policy of the financial authorities.
In the first quarter, the bank’s lending attitude index toward home loans was 0, which was milder than in the previous quarter (-35). The loan attitude index toward general household loans such as credit loans also slowed to -6 in the first quarter of this year from -41 in the previous quarter. However, banks expect household credit risk to rise in the aftermath of interest rate hikes in the first quarter. The credit risk index of domestic banks to households was 15, up 3 points from the previous quarter (12).
Concerns over households’ ability to repay their debts are growing as loan interest rates rise, loan demand rises, and loan attitude index eases. As the BOK raised the base interest rate by 0.75 percentage points per annum from 0.5% to 1.25% three times from August last year to this month, it is estimated that households’ interest burden will increase by 9.6 trillion won a year.
Financial authorities are also repeatedly urging people to be wary of ‘debt investment’ during the recent period of rising interest rates. In an executive meeting on the 14th, Koh Seung-beom, chairman of the Financial Services Commission, said, “Economic actors such as households and corporations should prepare for a full-fledged rise in interest rates. We need to reduce unnecessary debt through this,” he said.
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