Falling Commercial Bank Deposit Interest Rates... Dropping to 4% Range in Just One Month

[Asia Economy Reporter Buaeri] The soaring deposit interest rates have recently stalled. Last month, the deposit interest rates of the five major commercial banks, which were in the 5% range, have dropped to the mid-4% range. As the U.S. Federal Reserve (Fed) and the Bank of Korea are expected to slow down the pace of base rate hikes next year, the factors driving interest rate increases have diminished, and with the resumption of bank bond issuance, banks' funding has also eased. Some view this as a sign that deposit interest rates have reached their peak.

According to the disclosure by the Korea Federation of Banks on the 22nd, the interest rates for major fixed deposit products (12-month basis) of the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) are recorded at 4.63% to 4.75%.

Looking at each bank, KB Kookmin Bank's 'KB Star Fixed Deposit' offers an annual maximum interest rate of 4.65%, and Shinhan Bank's 'Sol Pyeonhan Fixed Deposit' offers an annual maximum of 4.63%. Woori Bank's 'WON Plus Deposit' and Hana Bank's 'Hana Fixed Deposit' provide an annual maximum interest rate of 4.7%. NH Nonghyup Bank's 'NH All One e-Deposit' offers an annual maximum of 4.75%. Compared to a month ago, the interest rates of these products have dropped by nearly 0.3 percentage points on average.

As of the 19th of last month, the interest rate of 'KB Star Fixed Deposit,' which was 5.01%, fell by 0.36 percentage points, and 'Sol Pyeonhan Fixed Deposit' also dropped by 0.32 percentage points from 4.95% to 4.63% during the same period. 'WON Plus Deposit' also decreased by 0.35 percentage points from 5.05% to 4.7%. 'Hana Fixed Deposit' and 'NH All One e-Deposit' also fell by 0.3 percentage points and 0.15 percentage points, respectively.

Typically, the widening interest rate gap between loans and deposits during rate hike periods is also narrowing. Except for Woori Bank, the household loan-deposit interest rate spread of the five major commercial banks decreased in November compared to the previous month. Hana Bank recorded a household loan-deposit interest rate spread of 0.71 percentage points, down 0.28 percentage points from 0.99 percentage points the previous month, showing the largest decrease. NH Nonghyup Bank, KB Kookmin Bank, and Shinhan Bank's household loan-deposit interest rate spreads decreased by 0.27 percentage points, 0.26 percentage points, and 0.23 percentage points, respectively. Woori Bank's household loan-deposit interest rate spread in November was 1.08 percentage points, increasing by 0.1 percentage points compared to the previous month.

In this regard, a representative from a commercial bank said, "As expectations arise that the Bank of Korea will not sharply raise the base rate further, market participants are also trying to lower interest rates, and the interest rates on bank bonds and long-term bonds are falling, leading to an overall downward trend. The possibility of fixed deposit product interest rates rapidly rising back to the mid-5% range is low, and rather, there is a possibility they could fall to the low 4% range."

[Image source=Yonhap News]

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