Bank deposits back in focus as market volatility rises, with 4% rates returning

As stock market volatility increases, time deposits are re-emerging as an option for consumers weighing where to put their money. Banks have raised deposit rates in quick succession and rolled out limited-offer products, bringing annual rates of 4% or above back into the market. However, deposits carrying rates of 4% or higher still account for only about 10 percent of newly issued deposits by volume, and borrowers need to check preferential conditions and maturities carefully — while those who already have loans are facing a growing interest burden.

According to the Bank of Korea's weighted average interest rate statistics for financial institutions released Sunday, 10.6 percent of new time deposits issued by deposit-taking banks in September carried annual rates of 4% or above. That was up 10.1 percentage points from 0.5 percent in August — the first time the share has reached double digits since December 2023, when it stood at 42.6%, marking a gap of two years and nine months. The figures are based on the volume of new deposits, not the number of accounts.

Deposits with annual rates of 3% or above but below 4% accounted for 70.8 percent of the total. Combined with the 4%-and-above share, 81.4 percent of new time deposits earned annual rates of at least 3%. By contrast, the share of deposits below 3% fell from 30.2 percent in August to 18.6 percent in September. A year earlier, in September 2025, 99.0 percent of new time deposits carried rates below 3%.

The average rate on new time deposits rose to 3.39 percent per year in September, up 0.25 percentage points from August and 0.87 percentage points higher than September 2025, when it stood at 2.52 percent. The average rate on one-year time deposits climbed from 2.54 percent to 3.57 percent over the same period. Assuming 100 million won ($74,900) is deposited for one year at the average rate, pre-tax interest income would rise from 2.54 million won to 3.57 million won — an increase of 1.03 million won.

Banks began raising rates on their flagship deposit products in September. KB Kookmin Bank and Shinhan Bank lifted rates on products with maturities of around one year from 3.20 percent to 3.50 percent per year. Hana Bank and Woori Bank also raised rates on one-year products to as high as 3.60 percent annually. NH NongHyup Bank likewise raised rates on its related deposit products.

Competition through limited-offer products continued into October. Shinhan Bank launched a product called "Super SOL Welcome Time Deposit," offering a maximum annual rate of 4 percent for customers who meet preferential conditions. NH NongHyup Bank released a product with a maximum annual rate of 3.90 percent; after the initial sales limit of 500 billion won was exhausted within a week, the bank offered an additional tranche of the same size. Woori Bank introduced a nine-month product at an annual rate of 3.80 percent, with a total cap of 2 trillion won. The three internet-only banks also released deposit products with annual rates in the high 3 percent range.

For borrowers, rising rates are adding to the financial strain. In September, only 9.6 percent of new household loans carried annual rates below 4% — roughly one-sixth of the 57.6 percent recorded in the same month last year. Meanwhile, the share of loans at 5% or above surged to 31.6 percent, more than quadrupling from 7.2 percent a year earlier. Loans with annual rates of 4.5% or above accounted for 70.1 percent of all new household lending.

The average rate on new household loans reached 4.96 percent per year in September, approaching the 5 percent mark. That was 0.79 percentage points higher than September last year and marked five consecutive months of increases since April. Among new mortgage loans, the share carrying variable rates rose to 65.8 percent. The average rate on the outstanding balance of household loans — including existing loans — also climbed from 4.31 percent at the end of last year to 4.58 percent in September.

Elevated loan rates are not expected to ease quickly. The Bank of Korea has kept the door open to further rate increases amid semiconductor-led economic growth and inflation running above its 2 percent target. Bank of Korea Governor Shin Hyun-song told the National Assembly's national audit on Oct. 23 that he "agreed" with the assessment that a return to the era of ultra-low interest rates seen in the past would not come easily.