Despite Base Rate Freeze... Bank Loan Interest Rates Rise Again

Although the Bank of Korea has kept the base interest rate unchanged, loan interest rates in the banking sector have generally risen. This is because concerns over prolonged monetary tightening in the United States have had a greater impact on the market than the base rate freeze in Korea, causing recent bond yields to surge.

According to the financial sector on the 5th, as of the 3rd, the mixed (fixed) interest rates for mortgage loans at KB Kookmin, Shinhan, Hana, and Woori Banks (based on 5-year bank bonds) range from 4.410% to 6.522% per annum. Compared to a month ago on February 3, the lower end of the rates applied to many borrowers has increased by 0.280 percentage points.

This is because the yield on the benchmark 5-year bank bonds rose by 0.589 percentage points during the same period (from 3.889% to 4.478%).

[Image source=Yonhap News]

Interest rates on unsecured loans (based on 1-year bank bonds, ranging from 5.420% to 6.450% per annum) also increased, with the lower end rising by 0.270 percentage points and the upper end by 0.140 percentage points over the past month. This is also related to the rise in 1-year bank bond yields (+0.391 percentage points).

Bond yields have been sharply rising over the past one to two weeks. This mainly reflects concerns about inflation in the United States and expectations of a strengthened tightening stance, including a 'big step' (a 0.50 percentage point increase in the base interest rate).

For variable-rate mortgage loans (new contracts linked to the COFIX), the current rates range from 4.920% to 6.946% per annum, with the lower end decreasing by 0.030 percentage points but the upper end increasing by 0.056 percentage points.

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