November Household Loan Interest Rate Rises 8bp to 2.72%... Largest Increase This Year

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

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] As the government began managing the rapidly increasing total household loans, the interest rates on household loans, including mortgage loans, recorded the largest increase this year last month. Deposit interest rates also rebounded accordingly.

According to the 'Weighted Average Interest Rates of Financial Institutions in November' statistics released by the Bank of Korea on the 30th, the interest rate on household loans (based on new contracts) last month was 2.72%, up 8bp (1bp=0.01 percentage point) from the previous month.

The interest rate on mortgage loans among household loans rose by 9bp, and group loans increased by 11bp. The interest rate on guaranteed loans rose by 15bp. Song Jae-chang, head of the Bank of Korea's Financial Statistics Team, explained, "The interest rates rose compared to the previous month due to the increase in benchmark interest rates and the financial authorities' efforts to manage the total volume of household loans."

However, the interest rate on general unsecured loans fell by 14bp. This was influenced by a significant decline in non-face-to-face loans, mainly among high-credit borrowers. Song said, "Last month, when the financial authorities announced household loan management measures, non-face-to-face loans by high-credit borrowers temporarily increased," adding, "The interest rate on non-face-to-face loans is about 10bp lower than that on face-to-face loans, which limits the rise in household loan interest rates."

The interest rate on corporate loans rose by 4bp to 2.72%. Large corporations (2.49%) maintained the previous month's level despite the rise in benchmark interest rates due to a higher proportion of high-credit borrowers, while small and medium-sized enterprises (2.86%) saw a 5bp increase from the previous month due to the rise in market interest rates.

The interest rate on savings deposits at deposit banks was recorded at 0.90% per annum, 2bp higher than the previous month. Deposit interest rates increased the average interest rate on savings deposits as pure savings deposits (0.89%) rose by 2bp mainly in time deposits, and market-type financial products (0.95%) rose by 3bp mainly in financial bonds.

The total deposit and total loan interest rates based on outstanding balances, not new contracts, fell by 3bp and 2bp, respectively.

Interest rates on deposits at credit cooperatives, mutual finance, and Saemaeul Geumgo outside banks generally remained similar to the previous month. Loan interest rates at mutual savings banks (-13bp) and Saemaeul Geumgo (-9bp) decreased, while those at credit unions (+6bp) and mutual finance (+2bp) increased. The decline in loan interest rates at mutual savings banks was influenced by a reduced proportion of high-interest unsecured loans.

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