Average Interest Rate on Household Loans in Banking Sector Nears 4%... Highest in 7 Years and 10 Months

Mortgage Loan Rate Down 0.04 Percentage Points to 3.84%

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] Last month, the average interest rate on household loans in the banking sector approached 4%, reaching the highest level in 7 years and 10 months.

According to the 'Weighted Average Interest Rate of Financial Institutions' statistics released by the Bank of Korea on the 29th, the household loan interest rate (weighted average, based on new loan amounts) of deposit banks in March was 3.98% per annum, up 0.05 percentage points from February. This is the highest level in 7 years and 10 months since May 2014 (4.02%).

Among household loans, the mortgage loan interest rate decreased by 0.04 percentage points to 3.84%. However, the general unsecured loan interest rate rose by 0.13 percentage points to 5.46%, marking the highest level in 7 years and 8 months since July 2014 (5.59%).

Song Jae-chang, head of the Financial Statistics Team at the Bank of Korea's Economic Statistics Bureau, explained, "The mortgage loan interest rate fell due to increases in preferential rates, but the overall household loan interest rate rose by 0.05 percentage points as interest rates on general unsecured loans and group loans increased due to rising benchmark rates and high-interest loans to low-credit borrowers."

The corporate loan interest rate (3.39% per annum) rose by 0.02 percentage points from February (3.37%). This is the highest level in 2 years and 6 months since September 2019 (3.42%). The average interest rate on all loans of deposit banks (weighted average, based on new loan amounts), reflecting both corporate and household loans, was 3.50%, down 0.01 percentage points from February (3.51%).

The average interest rate on savings deposits of deposit banks also rose by 0.04 percentage points to 1.74% per annum as market interest rates increased and market-type financial product rates rose.

The interest rate spread, which is the difference between the loan interest rate and the savings deposit interest rate of deposit banks based on new loan amounts, narrowed by 0.05 percentage points to 1.76 percentage points from February (1.81%). On a balance basis rather than new loan amounts, the total deposit interest rate (0.96%) rose by 0.03 percentage points, and the total loan interest rate (3.28%) increased by 0.08 percentage points. Accordingly, the interest rate spread (2.32 percentage points) widened by 0.05 percentage points. This is the largest increase in 3 years since March 2019 (2.32 percentage points).

Among financial institutions other than banks, the deposit interest rate of mutual savings banks (based on new 1-year fixed-term deposits) rose by 0.05 percentage points to 2.50% per annum, and mutual finance (2.01%) and credit cooperatives (2.43%) also increased. On the other hand, Saemaeul Geumgo (2.45%) decreased by 0.02 percentage points.

Regarding loan interest rates, credit cooperatives (4.47%), mutual finance (3.96%), Saemaeul Geumgo (4.48%), and mutual savings banks (9.24%) all saw increases.

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