The Great Rate Divide: Why Banks Are Paying You Less to Save and Charging You More to Borrow

In line with the base interest rate cut, deposit interest rates were lowered one after another.
Interest rates increase as authorities tighten household loans
Bank deposit interest rate difference rises for two consecutive months

Even after the Bank of Korea cut the base interest rate, interest rates on deposits and loans in the banking sector continue to fluctuate. This is because loan interest rates are rising as the financial authorities continue to manage household loans, while deposit interest rates are falling due to the base interest rate cut. As the household loan management trend is expected to continue for the time being, the deposit/loan margin (loan interest rate – deposit interest rate) is expected to expand further.

According to the Korea Federation of Banks announcement on the 3rd, as of the 2nd, the highest interest rate for major term deposit products of the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) was calculated to be around 3.35-3.55% per year.

Compared to the 12th of last month (3.55-3.80%), the day after the Bank of Korea’s base interest rate cut, the lower end was lowered by 0.20% point and the upper end was lowered by 0.25% point in three weeks.

Major banks have recently been lowering deposit and savings interest rates one after another to reflect the base interest rate cut. Including Nonghyup Bank, which lowered the interest rates on five types of deferred deposits by 0.25 to 0.4 percentage points on the 23rd of last month, Woori Bank also lowered the interest rates on savings products by 0.2% points on the 23rd and 1st of last month. Hana Bank also lowered the base interest rate for 11 types of receiving products by 0.05 to 0.25 percentage points from the 1st.

On the other hand, loan interest rates continue to rise.

According to the financial industry, the credit loan interest rates of the four major banks (KB Kookmin, Shinhan, Hana, and Woori) were calculated to be 4.160-5.860% per annum as of the 1st. Compared to the 11th of last month when the Bank of Korea lowered the base interest rate (3.880-5.880% per year), the lower end has increased by 0.280 percentage points in three weeks.

While deposit interest rates are falling, lending interest rates are rising, and the deposit-to-deposit interest rate differential, which is the margin (profit) of the banking sector, has been rising for two months.

According to the ‘Deposit-to-Deposit Interest Rate Difference Comparison’ statistics published on the Korea Federation of Banks’ consumer portal on this day, the deposit-to-deposit interest rate difference for household loans excluding policy microfinance (Sunshine Loan Bank, Sunshine Loan 15, safety net loans, etc.) actually handled by the five major banks in September was 0.43. It was calculated as ~1.05% points. Looking at the trend of deposit-loan interest rate difference compared to the previous month, among the five major banks, all except NH Nonghyup increased for two consecutive months in August and September.

An official from the banking sector predicted, “Deposit interest rates have fallen due to the base interest rate cut, but as the financial authorities continue to manage household loans, the difference between deposit and loan interest rates in October is likely to widen further.”

Reporter Park Mi-young mypark@segye.com

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