Average Interest Rate on Bank Household Loans at 5.57%... Highest in 10 Years and 8 Months

Due to the impact of the base interest rate hike, the average interest rate on household loans in the banking sector rose by 0.23 percentage points last month, reaching the highest level in 10 years and 8 months.

According to the 'Weighted Average Interest Rate of Financial Institutions' statistics released by the Bank of Korea on the 30th, the household loan interest rate (weighted average, based on new loan amounts) of deposit banks in November was 5.57% per annum, up 0.23 percentage points from the previous month. This is the highest level since March 2012 (5.62%), marking 10 years and 8 months.

Among household loans last month, the interest rate on general unsecured loans surged by 0.63 percentage points, and the interest rate on guaranteed loans rose by 0.55 percentage points, while the interest rate on mortgage loans fell by 0.08 percentage points.

The proportion of fixed-rate loans among household loans of deposit banks, based on new loan amounts in November, increased significantly to 36.8% from 29.0% in the previous month. The Bank of Korea explained that the increase in fixed-rate loans was due to the rise in the Safe Conversion Loan program, which converts variable-rate loans to fixed-rate loans.

The corporate loan interest rate (5.67%) rose by 0.40 percentage points. The increase in benchmark interest rates and the contraction of the corporate bond market expanded bank loan demand, causing corporate loan interest rates to rise sharply. This is the highest level in 10 years and 5 months since June 2012 (5.67%).

The interest rate on large corporate loans rose by 0.33 percentage points to 5.41%, and the interest rate on small and medium-sized enterprise loans increased by 0.44 percentage points to 5.93%.

The average overall loan interest rate (weighted average, based on new loan amounts) of deposit banks, combining corporate and household loans, was 5.64%, up 0.38 percentage points from 5.26% in October.

The average interest rate on savings deposits of deposit banks rose by 0.28 percentage points from 4.01% to 4.29% per annum. This increase reached the highest level since December 2008 (5.58%) due to some banks' efforts to attract deposits.

The loan-to-deposit margin, which is the difference between the loan interest rate and the savings deposit interest rate based on new loan amounts of deposit banks, expanded to 1.35 percentage points, reversing the trend after three months.

A banner related to loans is displayed at a bank in downtown Seoul. [Image source=Yonhap News]

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