South Korean banks raise deposit rates amid falling household loans

Major South Korean commercial banks are raising fixed deposit interest rates to attract customers amid rising market rates. Following recent adjustments by Hana Bank and Woori Bank, NH Nonghyup Bank has also increased its ‘NH All-One e-Deposit’ rates, with 1-year maturity rates rising from 3.25% to 3.45%. Shinhan Bank has similarly adjusted its rates, and KB Kookmin Bank is reportedly considering increases, meaning all five major banks now offer fixed deposit products in the 3% range.

In contrast to the rising deposit rates, household loans at the five major banks have decreased for the first time in six months. As of September 10, the total household loan balance stood at approximately 781 trillion won, a decrease of over 1.15 trillion won compared to the end of August. This decline includes reductions in mortgage, credit, and jeonse (charter lease) loans. Analysts attribute this trend to rising loan interest rates and banks' efforts to manage total loan volumes. The 5-year bank bond rate recently reached its highest level in nearly 30 months, contributing to the upward pressure on lending costs.