Major Korean Banks Are Showing Contrasting Moves in Their Interest Rates

Bank deposit and lending rates have been moving in opposite directions since the Bank of Korea cut its key interest rate. While major banks are lowering their deposit rates to reflect the rate cut, lending rates are rising due to pressure from the financial authorities to manage household lending.

The top interest rates on term deposits of the five largest banks are between 3.35 and 3.55 percent per annum, with the lower end dropping by 0.20 percentage points and the upper end by 0.25 percentage points in three weeks. Starting with NH Bank, Woori Bank, Hana Bank, SC First Bank Korea, and Toss Bank have cut their deposit rates.

On the other hand, the credit lending rates of the four major banks have risen by 0.280 percentage points in three weeks to 4.160-5.860% per annum, and mortgage lending rates are also on the rise. This is due to the financial authorities’ requirement to manage household lending, and it is expected that banks’ loan margins will expand in the near term. However, with further interest rate cuts next year and a slowdown in loan growth, the margin is expected to naturally shrink.

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