July Deposit Interest Rate 0.82%, Loan Interest Rate 2.70%... Another Record Low

[Asia Economy Reporter Kim Eun-byeol] Last month, deposit and loan interest rates in the banking sector fell to record lows once again.

According to the "Weighted Average Interest Rates of Financial Institutions in July" announced by the Bank of Korea on the 28th, the weighted average saving deposit interest rate (based on new contracts) of deposit banks was recorded at 0.82% per annum. This is 7 basis points (1bp = 0.01 percentage points) lower than June (0.89%), when it first dropped to the 0% range, setting a new record low for two consecutive months. Among the newly subscribed time deposits in July, 78.8% had interest rates in the 0% range.

Loan interest rates also fell by 2bp in one month, from 2.72% to 2.70%.

Breaking down by loan entities, the interest rate on loans to small and medium enterprises (SMEs) decreased by 3bp from 2.9% to 2.87%, while the loan interest rate for large corporations rose by 1bp from 2.54% to 2.55%. A Bank of Korea official explained, "While SMEs were affected by the decline in market interest rates, the proportion of high-interest loans to large corporations with lower credit ratings increased, causing the loan interest rate for large corporations to rise."

Household loan interest rates also dropped by 5bp from 2.67% to 2.62%. The decline in mortgage loan rates was 4bp (from 2.49% to 2.45%).

The difference between loan interest rates and saving deposit interest rates of deposit banks, i.e., the loan-deposit margin, widened by 5bp to 1.88 percentage points compared to June (1.83 percentage points). This is the highest level since February 2018 (1.88 percentage points).

The total deposit and total loan interest rates based on outstanding balances, rather than new contracts, were 0.91% and 2.98%, respectively, falling by 4bp and 7bp compared to June.

Deposit interest rates (based on new contracts for one-year fixed-term deposits) at mutual savings banks, credit cooperatives, mutual finance, and Saemaeul Geumgo also declined across the board last month. Loan interest rates also fell by as much as 11bp (credit cooperatives), but mutual savings banks were the only ones to see a 25bp increase.

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