October Bank Credit Loan Interest Rate 2.89%→3.15%, Impact of Loan Size Management

Bank of Korea 'Weighted Average Interest Rate of Financial Institutions in October'

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] As banks began managing the scale of unsecured loans, the general unsecured loan interest rate jumped to the 3% range in October.

According to the "Weighted Average Interest Rate of Financial Institutions in October" statistics released by the Bank of Korea on the 27th, the general unsecured loan interest rate (weighted average, based on new contracts) of deposit banks was recorded at 3.15%. This is a 26 basis points (1bp = 0.01 percentage points) increase from September's 2.89%.

Song Jae-chang, head of the Bank of Korea's Financial Statistics Team, explained, "The unsecured loan interest rate rose compared to the previous month as the spread was widened to manage the total volume of unsecured loans."

Mortgage loan interest rates also rose by 3bp from 2.44% to 2.47% in September due to an increase in the COFIX rate. Household loan interest rates increased by 5bp from 2.59% to 2.64%.

Looking at corporate loan interest rates, large corporations recorded 2.49%, up 6bp from the previous month, due to an increase in the proportion of low-credit borrowers. Meanwhile, small and medium-sized enterprises saw a 5bp decrease from 2.86% to 2.81%, due to expanded handling of facility funds and secured loans.

The interest rate on savings deposits at deposit banks remained at 0.88% annually, maintaining the September level. The deposit interest rate in September was 0.07 percentage points higher than August's 0.81%, marking a rise after three consecutive months of record lows since June (0.89%).

The difference between deposit banks' loan interest rates and savings deposit interest rates, i.e., the loan-deposit margin, was 1.78 percentage points, maintaining the previous month's level. The total deposit interest rate based on the balance at the end of October, not on new contracts, was 0.82% annually, down 2bp from the previous month. The total loan interest rate was 2.83% annually, down 4bp from the previous month.

Interest rates on deposits at non-bank financial institutions either maintained the previous month's level or declined, except for mutual savings banks. Loan interest rates, excluding mutual savings banks, all fell. Song explained, "The rise in loan interest rates at mutual savings banks is due to the increased proportion of relatively high-interest household general unsecured loans (from 32.5% to 36.4%)." The general loan interest rate at mutual savings banks rose from 9.73% to 10.18%.

This content was produced with the assistance of AI translation services.