[Money Flowing into Savings and Deposits] ① "Now is the Peak Interest Rate, Let's Reinvest" Funds Pouring In

"No Suitable Investment Destinations, Interest Rates Won't Rise Further"
Last Year's Open-Run Savings and Deposits Mature
Special Promotion Products Emerging Mainly in Secondary Financial Sector

As the era of a 3% base interest rate begins for the first time in 10 years, commercial banks have been raising deposit interest rates one after another, bringing bank fixed deposit rates close to 5% per annum. On the 26th, a banner displaying fixed installment savings interest rates was posted at a commercial bank in Seoul. Photo by Kang Jin-hyung aymsdream@

'Songpa Saemaeul Geumgo 369 Savings Special Sale Up to 6.5% Annual Interest'
'Dongdaegu Credit Union Fixed Deposit Special Sale 9 Months 4.5%'
'Saegoseong Nonghyup Fixed Savings Special Sale 10 Months 6%'….
(Post uploaded on a finance community on the 1st)

Office worker Lee Haeyoon (39) these days spends her free time searching for special savings and deposit products on portal site finance communities. She said, "Last September, I did an open run and joined a credit union with a 6% fixed deposit of 30 million KRW, and I also have two installment savings accounts with 7% interest rates. All of them are maturing soon, so I will have a total of 45 million KRW." She added, "Stocks are still unstable, and since savings and deposit interest rates are rising these days, I am thinking of reinvesting."

There is a trend of "re-depositing savings and deposits" detected in the financial sector. With no suitable investment options like stocks or coins, and the maturity of savings and deposits concentrated in September, October, and November last year coming due, coupled with the prevailing judgment that market interest rates at commercial banks are unlikely to rise further, special sale products are emerging one after another, especially in the secondary financial sector.

According to the five major banks (Kookmin, Shinhan, Hana, Woori, Nonghyup) as of the end of August, the balance of fixed deposits was 844.9671 trillion KRW, and installment savings were 42.2814 trillion KRW. These amounts increased by 11.9859 trillion KRW and 1.0294 trillion KRW respectively compared to the previous month. Although there was a decline when interest rates fell at the beginning of the year, the trend has been steadily increasing since the second quarter of this year.

Looking at the entire deposit banks in South Korea, the trend was similar. After the Legoland incident last year made it difficult to raise funds in the bond market, banks launched fixed deposit products with interest rates approaching 5% to secure funds. As a result, from September to November last year, the increase in savings deposits at deposit banks reached a whopping 69.4956 trillion KRW.

Subsequently, as market interest rates fell and savings and deposit interest rates declined, there was a net decrease of 4.2314 trillion KRW from December last year to April this year. Signs of a rebound appeared from May this year. In June alone, there was a net increase of 33.5189 trillion KRW. The financial sector predicts that the upward trend has continued so far.

As of the end of August, the representative savings and deposit product interest rates of the five major banks ranged from 2.85% to 4.41% for installment savings and 3.68% to 3.85% for fixed deposits. Compared to the end of March, they rose slightly by 0.1 to 0.2 percentage points. Although these rates are lower than those in the second half of last year, the perception that "current interest rates will remain at a high level for some time" is driving funds into savings and deposits. A private banker (PB) at a commercial bank said, "The base interest rate is currently at its peak, and the market believes this level will continue for a while. From the perspective of the base rate, this is the peak of deposit interest rates, which has increased interest in savings and deposits."

Another official from a commercial bank said, "Normally, credit loans are the barometer for stock or coin investments, but recently credit loans have been continuously decreasing." He added, "This means that even if people take out credit loans to invest, the returns do not exceed the interest, so investment demand has decreased, and that interest is shifting to savings and deposits."

Savings and deposits are also reviving in the secondary financial sector. In June, compared to the previous month, mutual savings banks increased by 361 billion KRW, mutual finance including Nonghyup and Suhyup unit cooperatives increased by 2.5049 trillion KRW, and Saemaeul Geumgo increased by 84.8 billion KRW. Recently, the secondary financial sector has been releasing high-interest special sale products, leading to overheated competition. This is a measure to reinvest funds amid concerns that deposits might suddenly outflow as the high-interest special sale restrictions approach at the end of last year.