Deposit and Savings Interest Rates Rise Again... Geumrinomad Prepares to Move After the 24th

Bank of Korea May Take Big Step at Monetary Policy Meeting on 24th

US FOMC Took Giant Step Early Morning on 3rd
Top 5 Banks Likely to Immediately Raise Deposit Rates
Interest Rate Nomads Prepare to Move in Search of Higher Rates

[Asia Economy Reporter Sim Nayoung] When the FOMC took a giant step (raising interest rates by 0.75 percentage points (p) at once) in the early morning of the 3rd (Korean time), the 'interest rate nomads' began to pay close attention to deposit and savings interest rates. Throughout this year, as the U.S. raised interest rates and Korea followed suit in the rate hikes, deposit interest 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 deposit interest rates of the five major banks increased from the 2% range to the 4% range. As the stock market cooled down and investors struggled to find alternatives, people started flocking to bank deposits and savings.

Office worker Gi Youngji (39) also canceled a 50 million KRW fixed deposit account she had opened three months ago after hearing the news 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%. Gi said, "Looking back at last year, that interest rate seemed high, but now, if I don't switch, I'd be a fool," adding, "Since the U.S. raised rates, the Bank of Korea will likely raise rates this month, and then commercial bank deposit rates will rise, so I will look at bank products then and re-subscribe."

Office worker Seo Woori (46) is also busy searching for deposit and savings interest rate information on financial communities. Seo said, "Credit unions or 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 frequently check my phone to switch to higher interest rates."

Interest rate nomads like Gi and Seo 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 that the Bank of Korea will take a third big step (raising the base rate by 0.5 percentage points) at the monetary policy meeting on the 24th of this month has increased. 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 of 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 conditions, the rates tend to be somewhat higher than fixed deposits. (▲KB Companion Happiness Installment Savings 4.50% ▲Woori SUPER Main Account Installment Savings 4.55% ▲NH Office Worker Monthly Compound Interest Installment Savings up to 4.78% ▲Shinhan Beautiful Courage Installment Savings 4.6% ▲Hana My Home Double Up Installment Savings 12 months 5.50%)

In the financial sector, it is expected that deposit interest rates will jump sharply once more after the Bank of Korea’s final base rate decision day this month on the 24th, with most major deposit and savings interest 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 deposits and savings, so competition will intensify when deposit interest rates rise this month," adding, "Financial authorities also require banks to reflect market interest rates in deposit rates once a month, 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.