Interest rates rise and interest rates fall

Commercial banks are moving to raise lending rates in earnest. On the other hand, deposit rates are falling despite the Bank of Korea’s possible rate hike. This is because there is a lot of liquidity in the market, so there is no need to raise regular deposits and installment savings rates.
According to the Bank of Korea’s economic statistics system on the 15th, the average interest rate on one-year regular deposits (based on new handling) stood at 0.93 percent as of April, down 0.01 percentage point from the previous month, the lowest in eight months since August last year. In particular, 30.8% of regular deposits at deposit banks had interest rates of less than 0.75%, the highest in 폰테크 eight months.
This is due to the fact that so much money has been released on the market, which has reduced the need for banks to respond by raising interest rates on deposits and savings.
Banks need to manage a certain level of loan-to-deposit ratio, which means the balance of loans to the deposit balance, but there are so many demand deposits to stay at the bank for a while that there is little incentive to attract a lot of regular deposits and installment deposits.
On the other hand, interest rates on loans are on the rise. According to the Bank of Korea, the average interest rate on household loans at deposit banks stood at 2.91 percent as of April, the highest in a year and three months since January last year (2.95%). Banks are also cutting interest rates. Without preferential interest rates, the final loan rate applied to customers goes up.
Nonghyup Bank lowers the preferential interest rate of Seoul Guarantee Insurance, Korea Housing Finance Corporation, and Korea Housing & Urban Guarantee Corporation (HUG) by 0.2 percentage points, respectively. Woori Bank also reduced the preferential interest rate on five individual credit loans.
“It is a measure to manage the volume of loans to focus on supporting real funds, such as finance for the working class, in line with the steep increase in household loans, focusing on mortgage loans,” said an official at Nonghyup Bank.
Other commercial banks’moves are also drawing keen attention as Nonghyup Bank has virtually raised lending rates following Woori Bank. The banking sector is highly likely to spread. This could increase the interest burden on those who took out loans.
“People with relatively weak credit ratings are taking out a lot of loans for living purposes, for business purposes, or for insufficient housing purchases, and these factors make it difficult to ease the risk of household debt at a time when market interest rates are rising,” an official from the financial sector said.

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