Countdown to Interest Rate Hike: Savings Rates Rise Near 4%

Savings rates at savings banks, mutual finance institutions, and internet-only banks are on the rise. Special deposit products offering rates in the 4% range have emerged in the mutual finance sector. As the Bank of Korea signals a potential interest rate hike in the second half of the year, competition for deposits is heating up.

According to the Korea Federation of Savings Banks on June 7, the average interest rate for one-year time deposits at 79 savings banks nationwide is 3.35%, up from 2.92% at the beginning of the year. The average rate has steadily increased from 2.95% in February to 3.06% in March, 3.19% in April, and 3.24% in May.

Individual product rates have climbed into the upper 3% range. Among 311 savings bank time deposit products, 17 offer rates around 3.7%. The highest rate is from Cham Savings Bank's 'Non-Face-to-Face Rotating Time Deposit' at 3.73%. Other products, such as Pepper Savings Bank's non-face-to-face 'Rotating Time Deposit', DB Savings Bank's 'DB Happy Fruit Deposit', and JT Savings Bank's 'e-Time Deposit', also offer rates in the 3.7% range.

In the mutual finance sector, time deposit products with rates of 4% have also appeared. Seowonju Credit Cooperative offers a special rate of 4.0% for its one-year non-face-to-face 'Time Deposit'. In some regions, such as the Seoul Future Saemaul Geumgo in Seongbuk-gu and the Gumi Sangmo Saemaul Geumgo in North Gyeongsang Province, the base rate for the 'MG The Banking Time Deposit' is set at 3.91%, with a maximum rate of 4.21% available under certain conditions.

Three internet-only banks have also raised their time deposit rates to the 3% range. Notably, K-Bank has increased the rate for its 'Code K Time Deposit' three times in the past month, currently offering the highest rate among internet banks at 3.41% for one-year deposits. KakaoBank offers 3.40%, while Toss Bank provides 3.2%. Major commercial banks remain at rates between 2.90% and 2.95%, but forecasts suggest they will soon reach the 3% range.

The rise in deposit rates is attributed to increasing market interest rates. As expectations for a rate hike by the Bank of Korea are reflected in government and bank bond yields, the cost of funding for banks also rises. Consequently, banks are compelled to increase deposit rates to attract funds. With the possibility of one or two additional rate hikes later this year, banks are proactively raising their deposit rates.

The competition for deposits is expected to continue for the time being, as the stock market enters a lull, potentially directing investment waiting for opportunities toward more stable deposit products. Additionally, the launch of youth savings products with rates as high as 7-8% is anticipated to further intensify the competition for deposits.

A financial industry official stated, "Typically, when expectations for an interest rate hike grow, market rates move first, prompting financial institutions to raise deposit rates accordingly. If the Bank of Korea implements a rate hike in the second half of the year, the competition for higher deposit rates is likely to persist."