Gap between mortgage and savings rates growing

Aug 05, 2024, 09:33 am

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A view of the apartment complex in Seoul./ Source: Yonhap News

AsiaToday reporter Cho Eun-gook

Major banks are drastically lowering their deposit rates as the market interest rates have rapidly dropped in anticipation of a key interest rate cut by the U.S. Federal Reserve. However, as lending rates are continuously rising under the pretext of handling household loans that are rapidly increasing, the gap between lending and deposit rates is expected to widen further. In other words, the interest income of banks is only getting bigger.

According to the financial sector on Sunday, market interest rates are falling rapidly as the Bank of Korea (BOK) is expected to lower its key interest rate due to the dovish stance of the U.S. Federal Reserve on September easing.

The interest rate on AAA-rated bonds continued to fall to 3.204 percent on August 2 from 3.803 percent at the end of May. The COFIX, which serves as the base rate for mortgage loans, is also on the decline. As a result, major banks are lowering interest rates on deposit starting this month. KB Kookmin Bank will lower interest rates on many deposit products by up to 0.2 percentage points starting on Monday. Earlier, Shinhan Bank also lowered the basic interest rate on received products by up to 0.2 percentage points last Friday.

The banks claim that the market interest rates have fallen significantly due to expectations of a cut in the benchmark interest rate at home and abroad, forcing them to reflect them in deposit rates.

While the banks the are lowering the deposit rate, interest rates on household loans such as mortgage loans have been rising since last month. Despite the decline in market interest rates, loan interest rates are rising on the other hand. As household loans have grown since April, financial authorities demanded that the banking sector strengthen household loan management, and banks are responding by raising loan interest rates.

#mortgage rate #savings rate #FED #BOK