Banks enjoy profits on public suffering.
Criticism of domestic banks is rising, as they reap profits by raising lending rates and lowering savings rates amid the ongoing political turmoil.
According to the Bank of Korea (BOK), the average mortgage rate of commercial and specialized banks stood at 2.89 percent in October, up 0.09 percentage points from a month earlier. The rate has been showing an uptrend since August.
The average interest rate on newly extended loans to the overall household sector has also risen from 2.95 percent in August to 3.08 percent in October.
In separate data from the Korea Federation of Banks, the average repayment mortgage rates of four major banks (KB Kookmin, Woori, KEB Hana and Shinhan) all hovered around 2.88 to 3.04 percent this month. Compared to their September figures, all of which remained below 3 percent, banks are raising their lending rates gradually.
Banks attributed their loan rate hikes to the rise of the global bond rate after the U.S. Presidential election, which naturally raised the domestic market interest rate. However, critics say the rise of the lending rate is also boosted by increases in spreads, which are determined by the banks' own discretion and included in the total lending rate.
"Given the country's snowballing household debt reaching 1,300 trillion won, the banks' current practices can be deemed a risky move at the expense of the public's livelihood," said a Seoul-based economist asking not to be named.
Fueling the criticism, banks plan to lower their savings rates or halt sales of high-interest rate products. In December, KB Kookmin Bank will lower the interest rate of its two deposit products and Shinhan Bank will also cut rates for a number of its deposit products and halt the sales of installment savings products with high interest rates. KEB Hana has already lowered interest rates on several deposit and installment savings products.
Banks say the lowered savings rates are to "normalize extraordinarily high savings rates set up previously," but customers are expressing their anger that banks are profiting at the public's expense.
"Banks have been adjusting their savings interest rates amid the prolonged low interest rate environment," said a bank official. "Amid such a situation, Donald Trump won the U.S. presidential election, leading the market rate to show an uptrend," he said, adding that banks will take time before adjusting the savings rate to "not widen the gap between savings and lending rates excessively."
Boosted by the gap between two interest rates, the four banks' accumulated net profit in the first three quarters of this year stood at 5.04 trillion won, up 25.2 percent from a year earlier.