January Deposit Interest Rate Decline Twice the Size of Loan Interest Rate Decline

Bank of Korea, Weighted Average Interest Rate of Financial Institutions in January

[Asia Economy Reporter Kim Eunbyeol] In January, as market interest rates showed a downward trend, both deposit and loan interest rates fell simultaneously. The decline in deposit interest rates was twice that of household loan interest rates.

According to the "Weighted Average Interest Rates of Financial Institutions in January 2020" announced by the Bank of Korea on the 28th, the interest rate on savings deposits fell by 6 basis points (1bp = 0.01 percentage points) from the previous month to 1.54%. The pure savings deposit interest rate, centered on time deposits, dropped 6bp to 1.53%.

For market-type financial products, rates fell 7bp, mainly due to CDs (-13bp) and financial bonds (-6bp).

Regarding loan interest rates, corporate loan rates (-4bp) and household loan rates (-3bp) both declined, resulting in the average loan interest rate dropping 3bp from 3.22% in the previous month to 3.19%.

For corporate loans, interest rates for large corporations (-5bp) and small and medium-sized enterprises (SMEs) (-2bp) both decreased. However, the decline was limited for SMEs as some banks reduced the volume of low-interest loans.

Household loan interest rates fell 3bp compared to the previous month. However, due to a reduction in the handling of the Bogeumjari Loan, mortgage loan interest rates rose by 6bp.

On a balance basis, both deposit and loan interest rates fell 2bp compared to the previous month.

For non-bank financial institutions, deposit interest rates fell across the board except for mutual finance (+3bp), while loan interest rates fell except for mutual savings banks (+89bp). The loan interest rate for mutual savings banks rose from 9.74% to 10.63%, as the proportion of household loans increased, pushing up loan rates as well.

A Bank of Korea official explained, "In January, the proportion of high-interest household loans compared to corporate loans at mutual savings banks expanded by 9.3%," adding, "Corporate loan interest rates are in the high 6% range, while household loan interest rates are in the high 14% range."

This content was produced with the assistance of AI translation services.