Short-term deposits with maturities of three to six months are showing higher interest rates than deposits with two-year maturities. It is typical for deposit products to offer higher rates for longer maturities, but demand for long-term deposits has fallen as money has flowed into investment markets such as stocks and real estate.
According to the Korea Federation of Banks on the 15th, the base rates for time deposits at the five major banks (KB, Shinhan, Hana, Woori, NH Nonghyup) are 2.26% for a three-month maturity, 2.4% for six months, and 1.9% for two years.
Shinhan Bank's SOL Easy Time Deposit offered 2.00%–2.6% for a three-month maturity and 2.00%–2.75% for six months, but 2.10%–2.40% for two years, with the top rate lower than for short-term deposits. Woori Bank's WON Plus Deposit also offers 2.65% for three months, 2.80% for six months, and 2.40% for two years.
This trend also appeared in banks' deposit balance statistics. According to the Bank of Korea statistics system, the balance of time deposits with maturities under one year rose from 402.3517 trillion won at the end of Jan. to 426.7042 trillion won at the end of Sept., up 24.3525 trillion won (about 6.05%). In contrast, the balance of time deposits with maturities of at least two years and up to three years fell from 26.2511 trillion won to 23.4107 trillion won over the same period, down 2.8404 trillion won (about 10%).
A financial industry official said, "From a consumer's perspective, as investment options with better profitability than deposits—such as stocks, real estate, and coins—have increased, the sentiment that 'borrowing to invest is better than long-term deposits' is growing." As of the 11th, the five major banks' negative account balances stood at 40.7582 trillion won, the highest in about three years.
A banking sector official said, "Recently, bank bond rates have risen too much, making the interest burdensome for raising funds through bonds," adding, "At year-end, money flows out as various savings products reach maturity, so banks are responding by raising short-term deposit rates."
According to the Korea Financial Investment Association's Bond Information Center, the five-year (AAA) bank bond rate was 3.603% as of the 12th. It edged down from 3.618% on the 11th, the record high for the year, but remains elevated.