Why 10 Trillion Won Rushed Into Korean Savings: The Last Train Before Rates Drop Further?

Introduction: The Great Deposit Rush of 2025

Did you know that despite falling interest rates, Koreans have poured over 10 trillion won into savings and fixed deposits in just one month? While it might sound counterintuitive, this phenomenon is making headlines across financial news and online communities. In June 2025, as the COFIX (Cost of Funds Index) continued its downward slide, many rushed to lock in what they see as the 'last train' before rates drop even further. Let's dive into why this is happening, what it means for the market, and how the public is reacting.

COFIX Continues to Fall: What Does It Mean?

The COFIX, which serves as a benchmark for variable-rate loans and reflects the funding costs of Korea's major banks, has dropped for eight consecutive months. As of May 2025, the new-transaction COFIX stood at 2.63%, down 0.07 percentage points from April, marking its lowest level in nearly three years. This decline signals that banks are securing funds at lower costs, which usually translates into lower deposit rates for consumers. The COFIX's persistent fall is a clear indicator of the broader interest rate environment in Korea, with the central bank's base rate also having been cut to 2.50% in May after a steady hold in April.

Why Are Depositors Rushing In Now?

Normally, when interest rates fall, people look for alternative investments. However, the opposite is happening in Korea. In April 2025, the total money supply (M2) in circulation jumped by 0.2%—an increase of 8.1 trillion won—after a brief dip in March. The main driver? A surge in demand for deposits with maturities under two years, which grew by a staggering 9.4 trillion won. This was the largest monthly increase since August 2024. The rush is attributed to savers trying to lock in current rates before further cuts, as seen in previous cycles where similar behavior occurred ahead of anticipated central bank rate reductions.

Deposit and Savings Rates: How Low Did They Go?

By June 2025, most major banks in Korea were offering 6-12 month fixed deposit rates in the 2.5–3% range, with only a few special products or online banks providing slightly higher rates. For example, Kookmin, Shinhan, Hana, Woori, and NH Nonghyup banks averaged around 2.4% for one-year deposits, while savings banks offered around 2.96%—still higher, but also on a downward trend. Some online banks and special promotions managed to push rates above 4%, but those were limited and often came with strict requirements. The consensus among bloggers and financial experts is that the era of 3%+ deposit rates is ending, and consumers are scrambling to secure the best deals before they're gone.

Community Reactions: What Are Koreans Saying?

Online communities like TheQoo, Instiz, and DC Inside are buzzing with debate. Many users express disappointment at the low rates, with some joking they'd rather 'buy crypto than settle for 2%.' Others are resigned, noting that even with lower returns, fixed deposits still offer safety in uncertain times. A recurring theme is the frustration over rapidly decreasing rates and the feeling that banks are quick to cut deposit rates but slow to lower loan rates. Some users highlight the strategy of splitting large sums across multiple banks to maximize deposit insurance coverage, especially with the upcoming increase in the protection limit from 50 million to 100 million won per person in September 2025.

The Policy Shift: Deposit Insurance Limit Doubles

A major policy change is also influencing depositor behavior: from September 2025, Korea will double its deposit protection limit to 100 million won per person. This move, intended to enhance financial safety, is expected to trigger a further shift of funds into savings banks and mutual finance companies, which offer higher rates than commercial banks. Analysts estimate that this could result in an inflow of 16–40 trillion won into non-bank institutions, though actual numbers may be lower due to recent declines in savings bank balances linked to real estate project financing risks. Still, the perception of increased safety is prompting many to reconsider where they park their money.

Cultural Insight: Why Are Koreans So Obsessed with Deposits?

For international readers, it's important to understand the cultural context. In Korea, financial safety and stability are highly valued, especially among older generations who have lived through periods of economic volatility. Fixed deposits and savings products are seen as a prudent way to preserve wealth, even if returns are modest. The popularity of online and mobile banking has also made it easier for younger people to shop for the best rates, leading to a more competitive market. However, as rates fall, the debate over risk versus reward intensifies, with some turning to stocks or cryptocurrencies in search of higher returns.

Bloggers' Take: Strategies and Tips

Naver and Tistory bloggers are full of advice for navigating the current environment. Many recommend comparing rates across banks, taking advantage of special promotions, and considering the tax implications of interest income (a 15.4% tax applies). Others suggest that now is the time to lock in longer-term deposits if you want to secure the current rates, as further cuts are likely. Some bloggers warn against putting all your eggs in one basket, especially with the increased insurance limit, and advocate spreading funds across multiple institutions for maximum safety.

Looking Ahead: What’s Next for Korean Savers?

With the Bank of Korea signaling a continued dovish stance and inflation remaining subdued, most analysts expect deposit rates to stay low for the foreseeable future. The rush into savings products may slow as rates fall further, but the cultural preference for safety means deposits will remain popular. Watch for more competition among online banks and new promotional offers as institutions vie for customers' funds. For now, the 'last train' metaphor rings true: many are jumping in before the doors close on higher rates, hoping to ride out the coming low-rate era with their savings intact.

Conclusion: The Last Train Before the Drop

In summary, the recent surge of over 10 trillion won into Korean deposits is a complex story of falling rates, policy shifts, cultural attitudes, and financial strategy. Whether this rush will continue depends on future central bank moves and market sentiment, but one thing is clear: in Korea, the search for safety and certainty in savings is as strong as ever.