Banks jack up rates on deposits

Customers do banking at a branch in Seoul on Jan. 14. [YONHAP]

Commercial banks are raising interest rates on deposits following the central bank’s rate hike last week.

Shinhan Bank, the second largest bank in Korea by assets, raised interest rates by as much as 0.4 percentage points on 36 financial products starting Monday.

On Jan. 14, the Bank of Korea (BOK) raised the benchmark rate by 0.25 percentage points to 1.25 percent, putting interest rates back in pre-pandemic levels.

The highest rate offered by Shinhan Bank for a savings plan is now 4.4 percent. For a one-year plan, the base rate offered is 1.4 percent which can rise based on certain conditions, like for first time savings customers.

The rate for a one-year savings plan for self-employed people was raised to 3 percent from 2.8 percent.

The bank “decided to quickly raise the depository rates in accordance with the BOK’s raising of the rates,” said a spokesperson for Shinhan Bank.

Woori Bank, the fourth largest bank, is raising rates by 0.1 to 0.3 percentage points on 38 financial products. The rate on its one-year ESG installment savings plan, has been upped by 0.3 percentage points to 2.35 percent.

“We plan to provide financial products that helps people build up their assets,” said a spokesperson for Woori Bank.

Other commercial banks including KB Kookmin Bank, Hana Bank and Nonghyup Bank have also decided to raise rates but haven't announced them yet.

Rate increases are coming to mortgages too.

KB Kookmin, Shinhan Bank, Hana Bank and Woori Bank are offering fixed mortgage rates between 3.75 percent and 5.51 percent as of Jan. 14, up from 2.69 percent to 4.2 percent in late 2020.

The central bank said that annual interest payments by households as a result of the benchmark rate increase will rise by 3.2 trillion won ($2.7 billion). Korea’s outstanding household debt in the third quarter of last year was 1,845 trillion won. The debt is projected to break 1,900 trillion won in the first half of this year.

BY JIN MIN-JI [jin.minji@joongang.co.kr]