January Bank Deposit and Loan Interest Rates Slightly Decline... Household Loan Interest Rates Rise

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] Last month, banks' deposit and loan interest rates slightly decreased compared to the end of last year. However, household loan interest rates increased.

According to the "Weighted Average Interest Rates of Financial Institutions" statistics announced by the Bank of Korea on the 26th, the average loan interest rate (weighted average, based on new contracts) of deposit banks in January was 2.72% per annum, down 0.02 percentage points from 2.74% in December last year. This marks a decline after two consecutive months of increase since October (2.66%).

By loan type, corporate loan interest rates fell by 0.04 percentage points from 2.73% to 2.69%. In particular, loans to large corporations decreased by 0.1 percentage points. The Bank of Korea explained that this was due to the decline in market interest rates and an increased proportion of loans to high-quality companies by banks.

However, household loan interest rates rose by 0.04 percentage points from 2.79% to 2.83% in one month. Song Jae-chang, head of the Bank of Korea's Financial Statistics Team, said, "Among household loans, mortgage loan interest rates increased by 0.04 percentage points (from 2.59% to 2.63%), largely due to the increase in the Bogeumjari Loan rate from 2.15% to 2.25%, a 0.1 percentage point rise." The Bogeumjari Loan rate is linked to medium- to long-term government bond yields, and as U.S. Treasury yields have recently risen along with government fiscal spending expansion, the government bond yields increased, causing the Bogeumjari Loan rate to rise as well.

Credit loan interest rates, which surged by 0.49 percentage points last December marking the largest increase in over eight years, fell by 0.04 percentage points to 3.46%. This was due to lower market interest rates such as bank bonds and some banks increasing the proportion of high-credit borrowers.

The average interest rate on savings deposits at deposit banks also decreased by 0.03 percentage points from 0.90% to 0.87%. Accordingly, the spread between deposit banks' loan interest rates and savings deposit interest rates (net interest margin) increased by 0.01 percentage points to 1.85 percentage points from 1.84 percentage points in December.

On a balance basis rather than new contracts, total deposit and total loan interest rates were 0.73% and 2.80%, respectively, with the net interest margin also increasing by 0.02 percentage points from 2.05% in December to 2.07%. Deposit interest rates (based on new contracts for one-year fixed deposits) at credit unions, mutual finance institutions, and Saemaeul Geumgo rose by 0.01, 0.05, and 0.01 percentage points respectively last month. Conversely, deposit interest rates at mutual savings banks fell from 2.04% to 1.95%. Loan interest rates at mutual savings banks increased by 0.20 percentage points, reflecting a rise in the proportion of household loans centered on high-interest credit loans.

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