Korean banks raised new deposit rates 24 bp in September, loans 17 bp
Serguey Asael Shinder1 min readBorrowing and saving both got more expensive in South Korea in September. The average interest rate on new deposits at banks rose 24 basis points from August to 3.45%, and the average rate on new loans rose 17 basis points to 4.57%, the Bank of Korea said in its monthly interest rate release on 29 October.
Rates on existing balances moved more slowly, as they always do. The average rate on outstanding deposits at the end of September was 2.27%, up 7 basis points, and on outstanding loans 4.48%, up 8 basis points.
Because deposit rates rose faster than loan rates, the gap between the average new loan rate and the average new deposit rate narrowed to 1.12 percentage points, from 1.19 points in August, according to the figures in the release. The release summarises the averages; breakdowns by type of loan and deposit are in the attached tables.
What it means
Rates on new business are the fastest channel through which tighter conditions reach households and companies, and a 24 basis-point jump in one month on the deposit side is large. The narrowing margin suggests banks are competing harder for funding than they are able to pass on to borrowers. The figures are averages across products, so shifts in the mix of new business can move them without any single rate changing.