Average Interest Rate on Bank Household Loans Hits Highest in 8 Years 9 Months... Mortgage Loans Surpass 4%

[Image source=Yonhap News]

Due to the Bank of Korea's base rate hikes and other factors, the average household loan interest rate at banks last month rose to the highest level in 8 years and 9 months, reaching the 4.2% range. Mortgage loan interest rates also surpassed 4%, marking the highest level in 9 years and 4 months.

According to the weighted average interest rate statistics for financial institutions announced by the Bank of Korea on the 29th, the household loan interest rate (weighted average, based on new loan amounts) at deposit banks in June was 4.23% per annum. This is the highest level in 8 years and 9 months since September 2013 (4.26%).

The mortgage loan interest rate among household loans rose by 0.14 percentage points to 4.04% per annum, entering the 4% range for the first time in 9 years and 4 months since February 2013 (4.06%). Credit loan interest rates also increased by 0.22 percentage points to 6.00% per annum, reaching the 6% range for the first time in 8 years and 10 months since August 2013 (6.13%).

Among new household loans at deposit banks last month, the proportion of fixed-rate loans was 18.4%, up 1.0 percentage point from the previous month. Song Jae-chang, head of the Financial Statistics Team at the Bank of Korea's Economic Statistics Bureau, explained, "The increase is due to a higher proportion of mortgage loans, which tend to be chosen with fixed rates, last month," adding, "It also seems to reflect expectations of future interest rate hikes." However, based on outstanding loan balances, the proportion of variable-rate loans was 78.1%, the highest since March 2014 (78.6%).

Corporate loan interest rates rose by 0.24 percentage points from 3.60% in the previous month to 3.84%, marking the highest level since February 2015 (4.02%). Interest rates for large corporate loans increased by 0.24 percentage points to 3.59% per annum, while those for small and medium-sized enterprises rose by 0.27 percentage points to 4.06% per annum.

The average interest rate on savings deposits at deposit banks also increased by 0.39 percentage points from 2.02% to 2.41% per annum. The loan-to-deposit margin (2.40 percentage points) based on outstanding balances widened by 0.03 percentage points. This is the largest margin in 7 years and 8 months since September 2014 (2.44 percentage points). The loan-to-deposit margin refers to the difference between loan interest rates and savings deposit interest rates based on new loan amounts at deposit banks.

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