Interest Rate Nomads 'Preparing to Move'...Top 5 Banks Likely to Exceed 5% Savings Deposit Rates in November

Early Morning of the 3rd, US FOMC Takes Giant Step
Bank of Korea May Take Big Step at Monetary Policy Meeting on the 24th
Top 5 Banks to Immediately Raise Deposit Interest Rates

[Asia Economy Reporter Sim Nayoung] Office worker Ki Youngji (39) canceled her 50 million KRW fixed deposit account, which she opened three months ago, after hearing the news early this morning that the U.S. Federal Open Market Committee (FOMC) raised interest rates. The interest rate on the product she subscribed to at the time was 3.5%. Ki said, "Looking back at last year, that rate seemed high, but now if I don't switch, I'll feel like a fool," adding, "Since the U.S. raised rates, the Bank of Korea will likely raise rates this month as well, and then commercial bank deposit rates will rise, so I will look at bank products again and re-subscribe."

Office worker Seo Woori (46) is also busy searching for savings and deposit interest rate information on investment communities these days. Seo said, "Credit unions and Saemaeul Geumgo often release high-interest products guerrilla-style, so information is very important," adding, "My parents even asked me to find deposit products for them, so I keep checking my phone frequently to switch to higher interest rates."

When the FOMC took a giant step (raising interest rates by 0.75 percentage points at once) in the early morning of the 3rd (Korean time), the 'interest rate nomads' started paying close attention to savings and deposit interest rates. Throughout this year, as the U.S. raised rates and Korea followed suit, deposit rates rose across both primary and secondary financial sectors.

From January to October, the Bank of Korea raised the base rate from 0.75% to 3.00%, and accordingly, the five major banks raised savings and deposit interest rates from the 2% range to the 4% range. As the stock market cooled down and investors struggled to find alternatives, many flocked to bank savings and deposits. The financial sector coined the term 'interest rate nomads' to describe people who move around seeking higher bank interest rates.

These interest rate nomads are preparing for their last move of the year. With the interest rate gap between Korea and the U.S. widening to 1 percentage point, the probability has increased that the Bank of Korea will take a third big step (a 0.5 percentage point base rate hike) at the monetary policy meeting on the 24th of this month. Commercial banks immediately raised deposit interest rates as soon as the Bank of Korea raised the base rate.

This trend is evident even in October. After the Bank of Korea raised the base rate by 0.5 percentage points last month, banks raised deposit interest rates by up to 1 percentage point starting the next day. This trend has continued, and the fixed deposit interest rates at the five major banks remain in the 4% range. (As of the 2nd: ▲KB Star Fixed Deposit 4.2% ▲Woori WON Plus Deposit 4.26% ▲NH All One e Deposit 4.45% ▲Shinhan Sol Comfortable Fixed Deposit 4.6% ▲Hana Fixed Deposit 4.10%)

For installment savings, if preferential interest rates are applied by meeting certain conditions, the rates tend to be somewhat higher than fixed deposits. (▲KB Companion Happiness Installment Savings 4.50% ▲Woori SUPER Main Transaction Installment Savings 4.55% ▲NH Office Worker Monthly Compound Interest Installment Savings up to 4.78% ▲Shinhan Beautiful Courage Installment Savings 4.6% ▲Hana Double Up for Home Purchase Installment Savings 12 months 5.50%)

The financial sector expects deposit interest rates to jump sharply after the Bank of Korea's final base rate decision day this month on the 24th, with most savings and deposit rates exceeding 5%. A commercial bank official explained, "After the Legoland incident, banks have found it difficult to issue bonds and have no choice but to raise funds through savings and deposits, so competition will intensify when deposit interest rates rise this month," adding, "Financial authorities also instruct banks to reflect market interest rates in deposit rates monthly, so there is sufficient reason for the increase."

The total deposits of the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) last month amounted to 1,900.1421 trillion KRW, an increase of 46.8657 trillion KRW compared to the previous month.