February Bank Mortgage Loan Interest Rate at 3.88%... Highest in 8 Years and 11 Months

The Bank of Korea Announces 'Weighted Average Interest Rate of Financial Institutions' Statistics

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] Last month, the average interest rate on mortgage loans in the banking sector approached 4%, reaching the highest level in 8 years and 11 months.

According to the 'Weighted Average Interest Rate of Financial Institutions' statistics released by the Bank of Korea on the 31st, the mortgage loan interest rate (weighted average, based on new loan amounts) of deposit banks in February was 3.88% per annum, up 0.03 percentage points from the previous month. This is the highest level since March 2013, when it recorded 3.97%.

The interest rate on general unsecured loans rose by 0.05 percentage points to 5.33%, marking the highest record in 7 years and 6 months since August 2014 (5.38%). Accordingly, the overall household loan interest rate also increased by 0.02 percentage points from 3.91% to 3.93% in one month. The household loan interest rate of 3.93% per annum is the highest since July 2014 (3.93%).

Song Jae-chang, head of the Financial Statistics Team at the Bank of Korea’s Economic Statistics Bureau, analyzed, "The rise in household loan interest rates was generally due to increases in short- and long-term benchmark interest rates such as COFIX (Cost of Funds Index) and bank bonds. The impact of banks raising their additional interest rates was minimal, and rather, some banks restored preferential interest rates, which reduced the actual interest rate increase compared to the rise in benchmark rates." Regarding future loan rate prospects, he said, "We need to observe to what extent the recent easing of lending attitudes by banks and other financial institutions will proceed."

The corporate loan interest rate rose by 0.14 percentage points from 3.30% in January to 3.44% per annum. The interest rate on large corporate loans surged by 0.24 percentage points to 3.27%, and the interest rate on small and medium-sized enterprise loans increased by 0.07 percentage points to 3.59%. Team leader Song explained, "This is due to the rise in benchmark interest rates, an increase in the proportion of long-term loans, and the handling of high-interest loans."

The average overall loan interest rate (weighted average, based on new loan amounts) of deposit banks, reflecting both corporate and household loans, was recorded at 3.56%, up 0.11 percentage points from January.

The average interest rate on savings deposits of deposit banks also rose by 0.05 percentage points from 1.65% to 1.70% per annum. Pure savings deposits increased mainly in time deposits and installment savings due to the rise in market interest rates and the launch of the Youth Hope Savings Plan, but market-type financial products declined due to a sharp drop in RP (Repurchase Agreements) despite rises in CDs (Negotiable Certificates of Deposit) and financial bonds, resulting in a month-on-month increase.

The spread between loan interest rates and savings deposit interest rates of deposit banks based on new loan amounts (net interest margin) widened by 0.06 percentage points to 1.86 percentage points compared to the previous month.

On a balance basis rather than new loan amounts, the total deposit interest rate rose by 0.05 percentage points, and the total loan interest rate increased by 0.08 percentage points. Accordingly, the net interest margin (2.27 percentage points) expanded by 0.03 percentage points. This is the largest increase in 2 years and 8 months since June 2019 (2.28 percentage points).

Deposit interest rates at non-bank financial institutions (based on 1-year fixed-term deposits) all rose, and loan interest rates increased except for mutual savings banks. The deposit interest rate of mutual savings banks rose by 0.02 percentage points in one month to 2.45% per annum, and Saemaeul Geumgo (2.45%), credit cooperatives (2.36%), and mutual finance (1.97%) also rose simultaneously.

Regarding loan interest rates, mutual savings banks fell by 0.12 percentage points to 9.10%, while credit cooperatives (4.41%), Saemaeul Geumgo (4.30%), and mutual finance (3.90%) saw increases.

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