They say interest rates are being cut, so why doesn't it feel that way?
The news is all abuzz about rate cuts, but loan rates are unchanged and deposit rates seem to be falling instead. Could someone explain in simple terms why the base rate and actual rates move separately?
8 answers
This is so true lol When there's news of a rate cut, deposit rates go down immediately, but loan rates get quietly lowered six months later
Well, rather than saying they “move separately,” it’s a matter of timing lag and margins... Isn’t it actually strange to expect interest on a 300 million won loan to drop sharply just because the base rate was cut by 0.25p? Even floating rates have agreed adjustment cycles, so they’re reflected a few months later.
The base rate is the wholesale price banks use when borrowing overnight money from each other, while my loan rate is the retail price with creditworthiness, funding costs, and margin added on top—so it doesn’t come down right away. Deposits are the opposite: if banks aren’t desperate for money, they cut deposit rates first. Yep.