Average Interest Rate on Bank Household Loans at 4.52%... Highest in 9 Years and 4 Months

Mortgage Loan Interest Rate 4.16%... Soaring
Credit Loan Interest Rate Reduced... Impact of Refinancing Loans

In front of a loan counter at a bank in Seoul Photo by Yonhap News

Due to the Bank of Korea's base interest rate hike and the resulting rise in market interest rates, the average household loan interest rate at banks last month rose to 4.52%, the highest in 9 years and 4 months. The mortgage loan interest rate also surged to 4.16%, marking the highest level in 9 years and 6 months.

According to the weighted average interest rate statistics for financial institutions announced by the Bank of Korea on the 30th, the household loan interest rate (weighted average, based on new loan amounts) at deposit banks in July was recorded at 4.52% per annum. This is the highest level in 9 years and 4 months since March 2013 (4.55%).

The Bank of Korea explained, "This is due to the rise in COFIX and short-term benchmark interest rates and the expanded proportion of general unsecured loans, which have relatively higher interest rates."

The mortgage loan interest rate among household loans rose by 0.12 percentage points from the previous month to 4.16% per annum, the highest level since January 2013 (4.17%). After surpassing 4% last month, it continues to soar, which is expected to increase the burden on the 'Younggeuljok' (those who borrow to the limit).

On the other hand, the general unsecured loan interest rate fell by 0.09 percentage points from 6.00% in the previous month to 5.91%. Regarding this, Park Chang-hyun, head of the Financial Statistics Team at the Bank of Korea's Economic Statistics Bureau, said, "Although short-term benchmark interest rates rose, the decrease compared to the previous month is attributed to the impact of Citi Bank's refinancing loans." Accordingly, the proportion of fixed interest rates among newly issued household loans at deposit banks last month also decreased from 18.4% in June to 17.8% last month.

(Data provided by Bank of Korea)

The corporate loan interest rate rose by 0.28 percentage points from 3.84% in the previous month to 4.12%. This is the highest figure since October 2014 (4.14%). The interest rate for large corporate loans increased by 0.25 percentage points to 3.84% per annum, and the interest rate for small and medium-sized enterprise loans rose by 0.30 percentage points to 4.36% per annum.

Last month, non-bank financial institutions saw both deposit interest rates (based on 1-year fixed-term deposits) and loan interest rates rise compared to the previous month. Mutual savings banks' deposit interest rates rose by 0.19 percentage points, and loan interest rates increased by 0.74 percentage points. Credit unions' deposit interest rates rose by 0.36 percentage points, and loan interest rates increased by 0.24 percentage points.

The interest rate spread between deposits and loans narrowed by 0.21 percentage points based on new loan amounts and by 0.02 percentage points based on outstanding balances. Team leader Park explained, "The narrowing of the interest rate spread is mainly due to the fact that loan interest rates have not risen as much compared to deposit interest rates," adding, "Typically, deposit interest rates immediately reflect policy rate changes, but loan interest rates, such as those on variable-rate mortgage loans, reflect changes in funding costs with a certain time lag."

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