**Busan Bank Reduces Deposit Interest Rates on the 18th**
**Gyeongnam Bank Lowers Rates by Up to 0.75%**
**Increase in Mortgage Loan Rates to Curb Household Loans**
**Concerns in Banking Sector Over Widening Gap Between Deposit and Loan Rates**
The decline in deposit and savings account interest rates within the banking sector has begun. While major commercial banks have been unable to drop their deposit and savings rates despite the Bank of Korea’s key interest rate cut, due to criticisms of profiting from interest, regional banks have proactively lowered their deposit rates. With financial authorities focused on curbing household debt, mortgage loan rates are rising, potentially widening the gap between deposit and loan rates.
On the 22nd, according to financial sources, Busan Bank reduced the interest rates on its key deposit products by 0.15 to 0.35 percentage points starting from the 18th. For example, the interest rate for the 6-month maturity ‘The Level-Up Term Deposit’ was lowered from 3.1% to 2.95%. The ‘BNK Customized Deposit’ rate was cut uniformly by 0.15 percentage points, now ranging from 2.55% to 2.75% depending on the maturity (1 to 11 months). Rates on products like the one-year ‘Hundred-Year Youth Silver Savings’ and ‘Pet Savings’ were also reduced by 0.35 and 0.2 percentage points, respectively.
Similarly, on the 17th, Gyeongnam Bank reduced its deposit and savings interest rates by up to 0.75 percentage points. The ‘Money Money Term Deposit’ experienced a 0.25 percentage point cut for maturities under 24 months, while the ‘My Side Support Pension Deposit’ rate dropped by 0.2 percentage points, from 3.1% to 2.9% for a one-year maturity. The ‘Money Money Free Savings’ saw a significant decrease for a 5-year maturity, from 3.55% to 2.8%.
Busan and Gyeongnam Banks initiated these deposit rate cuts just 6 to 7 days after the Bank of Korea lowered its base interest rate on the 11th, ending a 38-month streak without an adjustment. In contrast, major banks such as Kookmin, Shinhan, Hana, and Woori have not reduced their deposit product rates post the key rate cut, despite increasing loan rates for major products like mortgage loans to curb household loan growth. They fear that reducing only deposit and savings rates could provoke public backlash.
However, with regional banks leading in deposit rate cuts, there is growing anticipation that major banks might follow suit. If they don’t lower rates, funds might flow from regional to major banks that offer relatively higher interest rates. A financial officer from a major bank commented, “We cannot continue to offer high term deposit rates because even if deposits increase, household loan management prevents us from extending more loans.”
The deposit interest rate cuts are expected to widen the interest rate gap for Busan and Gyeongnam Banks, who have raised key mortgage rates while lowering deposit rates. Busan Bank’s flagship mortgage product, “ONE Mortgage Loan,” now has a minimum rate of 4.3%, up by 0.54 percentage points from August 8th’s 3.76%. Similarly, Gyeongnam Bank’s “BNK Mobile Mortgage” minimum rate increased from 3.99% to 4.17% during the same period.
Financial authorities are wary of the widening deposit-loan interest rate gap, which may pressure major banks against cutting deposit rates. On the 11th, Lee Bok-hyun, head of the Financial Supervisory Service, urged for close monitoring of interest rate trends to reflect the effects of the base rate cut during a financial status check meeting.