Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Banks in race to cut loan rates
Automated teller machines of major commercial banks are set up on a street in Seoul. Yonhap
By Lee Min-hyung
By Lee Min-hyung
Banks are in a rush to cut their interest rates on loans in a bid to avert public perception of them being “greedy” after the government introduced a policy that informs customers regarding each commercial lender's loan-to-deposit interest rate gap.
After the policy took effect on Aug. 22, most banks are now moving to cut interest rates on their loan products.
KB Kookmin Bank decided to cut its mortgage loan interest rate by 0.2 of a percentage point from Thursday. Shinhan Bank also started reducing interest rates for most of its non-collateral loan products targeting ordinary office workers by a range of 0.3 and 0.5 percentage points on the same day.
According to the notification posted on the website of the Korea Federation of Banks, Shinhan Bank's loan-to-deposit rate gap came in at 1.62 percentage points in July, the highest among commercial banks. KB, Woori and Hana came in at 1.4, 1.38 and 1.04 percentage points, respectively, during the same period.
Affected by the movement of conventional lenders, internet-only banks here are also following suit. KakaoBank, the largest mobile bank here, decided to cut interest rates for housing deposit loan products by a range of 0.31 and 0.41 percentage points. K bank also took a similar step by reducing interest rates on its housing deposit loans and non-collateral loans by 0.36 and 0.4 of a percentage point, respectively.
The moves came in response to growing political pressure, as President Yoon Suk-yeol and financial authorities have repeated their willingness to stop banks from generating any undue interest margin profits amid steeply growing interest rates sparked by post-pandemic monetary tightening.
Nonetheless, customers are advised to brace for the possibility of additional rate hikes by commercial banks.
“The Bank of Korea recently hiked the key interest rate, and is also widely expected to do so at least once or twice more by the end of this year, which will inevitably end up increasing banks' loan interest rates,” a source from the banking industry said.