60% of New Fixed Deposits Offer 'Interest Rate 2.75% or Higher'... Impact of Big Step

[Image source=Yonhap News]

[Asia Economy Reporter Kim Young-won] After the Bank of Korea's Monetary Policy Committee implemented a 'big step' by raising the base interest rate by 0.50 percentage points at once in July, about 60% of time deposits received interest rates of 2.75% or higher.

According to the Bank of Korea's "Weighted Average Interest Rates of Financial Institutions" statistics on the 11th, 56.2% of the time deposits newly handled by deposit banks in July had interest rates of 2.75% or higher.

The proportion of the interest rate bracket of 2.75% or higher had been 0% continuously from 2018 until January this year, and was barely found in February to March (0.2%), April (0.8%), and May (2.5%) this year. However, due to successive base rate hikes, it surged sharply to 25.0% in June, and after the big step was taken in July, it immediately accounted for more than half (56.2%).

In addition, it was found that virtually all new time deposit subscribers received interest rates of 2% or higher. Following the 2.75% or higher bracket, the proportions were 12.3% for 2.50% to less than 2.75%, 9.6% for 2.25% to less than 2.50%, and 8.6% for 2.00% to less than 2.25%, in that order. Only 13.3% of new time deposits were applied with interest rates below 2%.

In April, the largest proportion was in the interest rate bracket '1.50% to less than 1.75%' (21.3%), and '2.75% or higher' was only 0.8%.

Due to this rapid change in the interest rate environment, financial consumers have found it difficult to decide whether to cancel existing savings and time deposits and switch to new products with higher interest rates or to maintain them.

Experts generally advise that if less than three months remain until maturity, it is better to wait even if other products offer higher interest rates. This is because, when breaking a time deposit early, the interest rate is usually applied at only 50 to 80% of the base rate (excluding preferential rates) depending on the deposit period.

Also, experts evaluated that if it has been less than three months since subscription, it is generally advantageous to break the deposit early and subscribe to another product with a higher interest rate.

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