As interest rates for savings accounts are rapidly declining, applications for Youth Leap Accounts, which promote a '9% annual savings effect,' are soaring.
According to the financial sector and financial authorities on the 9th, the number of new applicants for the Youth Leap Account last month was recorded at 170,000.
Considering that the application period for last month was only 7 days, the average number of daily applications reached about 24,300. This is more than five times the average daily applications of 4,400 in the previous month (total applicants 57,000, application period 13 days).
Applications for the Youth Leap Account continue to soar this month.
The application period for the Youth Leap Account this month is from the 3rd to the 14th, and as of the 6th, a total of 116,000 people have applied.
The average number of daily applications over four days is 29,000, approaching 30,000.
Amid this trend, the total number of participants in the Youth Leap Account has ballooned to 1.66 million, reaching 28% of the estimated eligible youth population of 6 million.
The Youth Leap Account is a policy finance product designed to allow monthly deposits of up to 700,000 won over five years, potentially yielding a lump sum of up to 50 million won through bank interest and government contributions.
Last year, the average number of daily applicants was only in the thousands, and its popularity was waning, but it is interpreted that the recent interest rate cuts have increased its relative appeal as interest rates for savings accounts declined.
Notably, from January of this year, the government has expanded its contributions, leading to an increase in revenue effect from the previous maximum annual rate of 8.87% to 9.54%.
A financial sector official analyzed that, considering the conditions in the financial market such as average stock market returns, interest rate declines, and exchange rate rises, the Youth Leap Account is virtually the only option that offers this level of revenue without risk.
According to the Bank of Korea, the interest rate for time deposits in commercial banks (based on new transactions) remained at 3.2% in December last year.
It has been a long time since the deposit interest rates for commercial banks have entered the 2% range, and even the savings banks and internet-only banks, which previously offered relatively high rates, are also recently falling below '3%'.
The government is also presenting various 'carrots' to encourage youth participation.
To alleviate the long-term burden of the Youth Leap Account, the Financial Services Commission has broadly recognized special early withdrawals including marriage and childbirth, and guarantees revenue effects of up to the high 7% annual rate even if withdrawn after maintaining the account for over 3 years.
Partial withdrawal service, credit score incentives, and enhanced linkage with the Youth Housing Dream Subscription Account are also key incentives proposed by the government.