Deposit Interest Rate Drops Below 3% for the First Time Since August 2022
Mortgage Loan Rates Fall Again After a Month
Loan-to-Deposit Interest Rate Spread Widens for Six Consecutive Months to 1.49%
Deposit interest rates handled by banks have fallen to the 2% range for the first time in 30 months.
Mortgage loan (Judaemdae) interest rates fell again after a month, but the loan-to-deposit interest rate spread (loan interest rate - savings deposit interest rate) has been widening for six consecutive months.
According to the weighted average interest rates of financial institutions for February announced by the Bank of Korea on the 28th, the savings deposit interest rate (based on new transactions) of deposit banks last month was 2.97% per annum, down 0.1 percentage points from the previous month.
This is the first time in 30 months since August 2022 (2.98%) that the savings deposit interest rate, which includes time deposits and installment savings, has fallen below the 3% range.
The savings deposit interest rate has declined for five consecutive months since October last year (3.37%) due to the base rate cut and falling market interest rates, and this time it dropped to the 2% range.
Specifically, pure savings deposits, centered on time deposits, fell by 0.11 percentage points to 2.97% per annum. Market-type financial product interest rates, mainly CD (Certificate of Deposit) rates, fell by 0.07 percentage points to 2.97%.
The mortgage loan interest rate (based on new transactions) was 4.23% per annum, down 0.04 percentage points from the previous month. Specifically, fixed-rate mortgage loan interest rates (4.22%) fell by 0.04 percentage points, and variable-rate interest rates (4.25%) fell by 0.09 percentage points.
Mortgage loan interest rates rose from August (3.51%) to November last year but turned downward in December due to some banks lowering their additional interest rates. After rising again a month later, they fell again this time. At that time, the Bank of Korea expected the effect of the banks' lowered additional interest rates to be reflected from February.
Kim Minsu, head of the Financial Statistics Team 1 at the Bank of Korea's Economic Statistics Department 1, explained, "This was mainly due to the 0.3 percentage point reduction in the Bogeumjari Loan interest rate in February."
Household loans, including mortgage loans, fell by 0.13 percentage points to 4.52% per annum from the previous month. Jeonse deposit loans and general credit loans have fallen for three consecutive months since December last year. This is due to the decline in benchmark interest rates such as bank bonds and COFIX following the base rate cut.
Jeonse deposit loan interest rates fell by 0.07 percentage points to 4.09% per annum, and general credit loan interest rates fell by 0.08 percentage points to 5.5% per annum.
Corporate loan interest rates fell by 0.07 percentage points to 4.46% per annum from the previous month. Due to the base rate cut, short-term market interest rates, which are key indicators for corporate loans, declined, causing interest rates for both large and small-to-medium enterprises to fall.
The loan-to-deposit interest rate spread (based on new transactions) widened by 0.03 percentage points to 1.49 percentage points. It has been widening for six consecutive months since September last year (1.22 percentage points). Although loan interest rates fell, savings deposit interest rates, including deposit interest rates, fell more sharply.
However, the loan-to-deposit interest rate spread based on outstanding balances narrowed by 0.04 percentage points to 2.24 percentage points. The total deposit interest rate based on outstanding balances fell by 0.02 percentage points to 2.38% per annum, and the total loan interest rate fell by 0.06 percentage points to 4.62% per annum.
Kim said, "Since existing variable-rate loans adjust interest rates every six months, the base rate cut appears to have affected outstanding loan interest rates with a time lag. It is more appropriate to view the interest burden of all borrowers based on outstanding balances."
He added, "Except for a slight widening in November and December last year, the loan-to-deposit interest rate spread based on outstanding balances has been on a downward trend and is shrinking this year as well. When considering all borrowers with loans, the loan-to-deposit interest rate spread can be seen as narrowing."
The proportion of fixed-rate household loans rose by 5.7 percentage points from the previous month to 61.8%, marking a rise for two consecutive months. The fixed-rate proportion of mortgage loans increased by 0.6 percentage points to 89.5%.
Meanwhile, deposit interest rates at non-bank financial institutions fell across the board: mutual savings banks (-0.2 percentage points), credit cooperatives (-0.02 percentage points), mutual finance (-0.05 percentage points), and Saemaeul Geumgo (-0.03 percentage points). Loan interest rates (based on general loans) fell at mutual savings banks (-0.66 percentage points) and mutual finance (-0.05 percentage points), while Saemaeul Geumgo's loan interest rate rose by 0.02 percentage points.
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