Major commercial banks raised time-deposit rates as they moved to compete for customers. The pace of loan growth eased slightly due to higher lending rates and tight volume caps.
According to the financial sector on the 13th, Woori Bank on the 11th raised the rate on its "Woori first transaction preferential time deposit" (1-year maturity) by 0.5 percentage point (p) to as high as 3.6% a year from 3.1%. That is the highest among major commercial banks.
The product is a non-face-to-face, exclusive deposit that adds a 1.0%p preferential rate if the customer did not hold a Woori Bank account as of the end of the year immediately before new enrollment. Woori Bank raised the base rates on 6-month to 1-year maturity deposits to 2.6% a year from 2.1%, and applied a maximum rate of 3.6% when adding the 1.0%p preferential rate.
It also raised base rates to 2.8% from 2.3% for 1–2-year maturities, to 2.2% from 1.9% for 2–3-year maturities, and to 2.2% from 1.9% for 3-year maturities. Earlier, on the 10th, Woori Bank increased the rate on its flagship time-deposit product, "WON Plus Deposit," by 0.2%p to 3.4% a year from 3.2%.
Shinhan Bank on the 9th raised the rate on its "Sol Easy Time Deposit" to 3.4% a year from 3.2%, up 0.2%p. Hana Bank on the 10th raised the rate on "Hana Time Deposit" to 3.3% from 3.2%, and NH NongHyup Bank on the 11th raised the rate on "NH All One e-Deposit" to 3.45% from 3.25%. KB Kookmin Bank is reportedly reviewing an increase in deposit rates.
As of the 10th, the outstanding loan balance of the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH NongHyup) stood at 780 trillion 9.677 billion won. That was down 1 trillion 1.514 billion won from the end of Aug. It was the first time in six months, since March, that the outstanding household loan balance turned to a decline.
Mortgage loans fell by 517.2 billion won and unsecured loans by 574.8 billion won. Jeonse loans also dropped by 249.7 billion won. It is the first time in eight months, since Jan., that household loans at the five major banks—as well as mortgage loans, unsecured loans, and jeonse loans—have all decreased from the end of the previous month.
It is seen as the effect of the recent rise in lending rates. The five-year bank bond yield, the benchmark for mortgage loan hybrid rates, surged to 4.578% a year on the 11th, the highest in 2 years and 10 months since Nov. 3, 2023 (4.586%). The five-year bank bond yield also climbed back above 4.5% in two months since July 24 (4.531%).
It is estimated to reflect consecutive hikes in the Bank of Korea's policy rate and expectations of U.S. rate increases. The Cost of Funds Index (COFIX), the benchmark for variable mortgage loan rates, was 3.18% a year for new handling in July, reaching a record high in 1 year and 7 months since Dec. 2024 (3.22%). COFIX for new handling reflects major bank funding rates, including time deposits. The recent increase in deposit rates could add upward pressure on COFIX and variable lending rates.