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Photo = Yonhap news |
[Alpha Biz= Kim Sangjin] According to financial sources on Sunday, Shinhan Bank is considering reducing the premium on household loan products by up to 0.3 percentage points. Details, including the amount of reduction for each product, are expected to be finalized early this week. If the premium reduction takes place, it will mark the first downward adjustment in about six months. KB Kookmin Bank has not yet finalized its premium adjustment, but is reportedly monitoring the market conditions and plans to lower the interest rate if necessary.
A bank's loan interest rate consists of a "benchmark rate," which reflects market and funding rates such as bond rates and COFIX (Cost of Funds Index), and a "premium" that the bank adds at its discretion. Banks explain that the premium includes operational costs, legal expenses, and risk premiums, but it is also used as a tool to manage loan demand and profit margins.
Since July last year, banks have been steadily increasing their premiums. After the third quarter of last year, the "all-in" (borrowing everything) phenomenon, especially for apartments in the metropolitan area, led to a surge in household loans, prompting the financial authorities to impose strong measures to curb loan demand. Banks raised premiums to increase loan interest rates and also strengthened their own loan regulations, such as halting mortgage loans for property purchases to existing homeowners.
As a result, the interest rate spread between deposits and loans for the five major banks widened, surpassing 1 percentage point in November, which caused controversy. This was the first time since March 2023 that the spread had widened in 1 year and 8 months. Despite two rate cuts by the Bank of Korea in October and November last year, banks only lowered deposit (savings) rates while not reducing household loan premiums, citing the need to manage loan portfolios.
If Shinhan Bank first lowers its loan premiums, other major banks are expected to actively consider similar reductions. This is because banks that lower interest rates could face an influx of household loan demand, potentially losing out in the competition.
Moreover, as the size of household loans is showing signs of gradually decreasing this year, banks are likely to become even more sensitive to interest rate competition. As of January 9, the household loan balance of the five major banks, including Kookmin, Shinhan, Hana, Woori, and NH Nonghyup, stood at 733.769 trillion won, which is 3.66 trillion won lower than the 734.135 trillion won at the end of last year. Although about 20 days are left until the end of January, if the loan balance decreases by the end of the month, it will mark the first decrease in 8 months since March 2023 (-2.2238 trillion won).
Alphabiz Reporter Kim SangJin(letyou@alphabiz.co.kr)
