Deposit interest rates hit rock bottom, why are lending interest rates decreasing slowly?

Cheap mobilization money, people expect to borrow at low interest rates

From the end of 2022 to the end of 2023, deposit interest rates will fall almost vertically.

Accordingly, by the end of December 2023, the Big4 banking group will simultaneously adjust down deposit interest rates for terms of less than 12 months, bringing interest rates to the lowest level in history.

Notably, although interest rates are continuously adjusted downward by banks, the amount of deposits from people and economic organizations continuously increases.

The latest update from the State Bank shows that as of the end of September, deposits from residents and economic organizations in the banking system reached 12.68 million billion VND. Compared to the end of 2022, the amount of deposits from residents has increased by a total of more than 583,000 billion VND, equivalent to 9.95%.

From the above conflicting developments, public opinion cannot help but wonder when lending interest rates will decrease.

Having completed a perfect wedding in mid-October 2023, Mr. Nguyen Thanh Nam (Ha Nam, Hanoi) and his wife are still renting a mini apartment in Mo Lao ward, Ha Dong.

Preparing to have a baby in 2024, Mr. Thanh Nam plans to use his Tet bonus to deposit an apartment in the same area next year at the end of the lunar year 2023.

"I am looking into a home loan package at BIDV Bank. The credit officer advised me on a loan package with an interest rate of 7.3%/year applied for the first 6 months, or 7.8%/year applied for the first 12 months. After the preferential period, the interest rate will be floating. Currently, the savings interest rate of this bank is also low. However, my wife is not very satisfied" - Mr. Nam shared.

Not only Mr. Nam, but also those who need to borrow money from banks to buy real estate also hope that loan interest rates at banks will decrease further.

Ms. Truong My Linh (Nam Tu Liem, Hanoi) hopes: "After Lunar New Year 2024, I want to borrow 1 billion VND to buy and renovate a new apartment. Therefore, I hope that bank loan interest rates will decrease further."

Why are deposit interest rates and lending interest rates not decreasing at the same rate?

In fact, the reduction in deposit interest rates will create conditions for the reduction in lending interest rates. Although the reduction in input and output interest rates has not been synchronized in recent times, experts predict that lending interest rates still have room to decrease further, especially in the context of slow credit growth, commercial banks must reduce interest rates to compete for loans.

Predicting the mobilization interest rate in 2024, Associate Professor, Dr. Dinh Trong Thinh - senior lecturer of the Academy of Finance - said that in the first quarter of 2024, the mobilization interest rate may gradually increase again, and return to about 5%/year.

"Interest rates in 2024 will basically remain stable. Lending interest rates may decrease a little more, with a specific time around February-March 2024. The reason is that deposit interest rates are currently very low, which is the basis for lending interest rates to be adjusted" - Associate Professor, Dr. Thinh shared.

Explaining why deposit interest rates have decreased but lending interest rates have not decreased at the same pace, Mr. Thinh said that the loans that people borrow at high interest rates are the amount of money mobilized at high interest rates.

"When the money in the bank is mobilized at high interest rates and is lent out, the money mobilized at low interest rates will be used. At this time, the lending interest rate will also decrease. Therefore, the lending interest rate in the early period of 2024 is forecast to decrease slightly" - economic experts predict.

Remember in early December 2023, at the "Dien Hong Conference" to remove difficulties for credit growth, VPBank General Director Nguyen Duc Vinh said that recently, banks have sharply reduced interest rates and interest rates are very low.

In fact, at VPBank, the reduction in lending interest rates is greater than the reduction in interest costs. “The fact that banks focus on expanding and facilitating lending to help businesses and people overcome this difficult period means that banks are accepting greater risks. It can be said that banks are accepting to bet on the economy,” Mr. Vinh said.

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