NH NongHyup Raises Rates After Just 10 Days, Tops Major Banks

NH NongHyup Bank raised its basic deposit and savings rates by 0.20 to 0.25 percentage points starting on the 23rd. With the one-year maturity rate of its flagship time deposit, 'NH All One e-Deposit,' rising from 3.45% to 3.55% per annum, the bank now offers the highest rate among the five major commercial banks. The one-year rates on KB Kookmin Bank's 'KB Star Time Deposit' and Woori Bank's 'WON Plus Deposit' stand at 3.50% per annum, while Hana Bank's 'Hana's Time Deposit' and Shinhan Bank's time deposit offer 3.40%. For depositors, comparing rates across banks has become increasingly important, as the same deposit can now earn more interest.

With competition over deposit rates heating up among banks, internet-only banks have joined the fray. Starting on the 23rd, Kakao Bank raised its one-year time deposit rate by 0.10 percentage point from 3.60% to 3.70% per annum, its fifth rate increase since February this year. K Bank's 'Code K Time Deposit' follows at 3.61% per annum, and Toss Bank's 'Interest First Time Deposit' at 3.60%.

The rise in market rates is behind the banks' deposit rate hikes. As of the 22nd, variable-rate mortgage rates at the five major banks ranged from 4.35% to 6.72% per annum, with the lowest rate up 0.33 percentage point from 4.02% to 6.37% on July 15. According to the Bank of Korea, variable-rate loans accounted for 68.1% of new mortgage lending in July, the highest level in 12 years and 5 months. The central bank estimated that a 0.25 percentage point rise in housing-related lending rates would increase total annual interest burdens for all borrowers by about 1.8 trillion won, or an average of 296,000 won per borrower per year.

The COFIX for August, based on new lending, stood at 3.18% per annum, unchanged from the previous month. COFIX, an index reflecting banks' funding costs for deposits and savings, is later reflected in variable-rate mortgage rates.

Time deposit balances at the five major banks are growing rapidly. As of the 17th, their combined time deposit balance stood at 1,010.37 trillion won, up 5.14 trillion won from the end of August (1,005.23 trillion won).