Annual Market Interest Rate drops to 3% Level

As the fund in the money market flows into financial institutes, interest rate on deposit has been decreasing, and average weighted interest rate on deposit at the balance of September was 3.98% annually and it is the first time to drop at 3% level since 1998 the statistics began to be made.

On the 28th, the Bank of Korea announced the fact in ‘The Interest Rate Tendency of Financial Institutes in September’.

The Bank of Korea analyzed the decrease of interest rate as the results of increase of money in the economy and the shortage of investment subjects by financial institutes.

Interest rate on deposit has been declined since June of 1999 of 6.85% p.a., April of 2001 of 5.75% p.a. August of 4.02% p.a.

On the other hand, interest rate on loan based on balance increased to 7.55% by 0.04% compared to August. It was the result of active collection of bad debts by financial institutes at the end of the quarter.

So the difference of interest rates between loan and deposits, the main income sources of financial institutes, shows increasing tendency with 3.57% from 3.42% of July and 3.49% of August.

Annual interest rate on deposit based on new deposit is 4.01% and interest rate on loan is 6.71%, and they decreased by 0.01% respectively compared to August.

Among the new deposits, housing saving is paid highest interest rate of 5.27% p.a., and the next is regular saving of 5.14%, mutual deposits of 4.86%, cover bill of 4.78%, term deposit of 4.73%, negotiable deposit of 4,71% etc.

Among the interest rates on loan, interest rate on household loan decreased from 7.17% p.a. to 7.08%, but interest rate on company loan increased from 6.47% to 6.52% because some large-sized companies borrowed money at high interest rate.

Interest rate on term deposit of mutual saving bank increased from 5.94% p.a. to 5.94% p.a., but the rate of credit cooperative associations dropped from 5.59% to 5.58%.

Kwu-Jin Lim mhjh22@donga.com