'Loan Liberation Diary' Using Fixed Interest Rates... 80% of Mortgage Loans Concentrated

Fixed Interest Rates on Mortgage Loans at 5 Major Banks Lower Than Variable Rates
Shift Toward Refinancing and New Loans with Fixed Rates

A customer is receiving consultation at a bank loan counseling desk. Photo by Jinhyung Kang aymsdream@

"Two years ago, when I took out a mortgage loan of 300 million won, the interest rate started at 2.9%. It rose to 5.8% at the end of last year and recently dropped back to 5.2%, but it is still a heavy burden. People around me have been refinancing with mortgage loans at rates in the 3-4% range, so I am currently looking into it," said Kim Suhwan (36), an office worker living in Sangdo-dong, Seoul.

He added, "Although I have to pay a prepayment penalty, if I can lower the rate to the high 3% range, I think I can reduce my monthly interest by about 200,000 won, so there is no need to hesitate." As fixed mortgage rates have fallen, more people like Kim are choosing fixed rates either through refinancing or when buying their first home.

As of the 14th, the fixed interest rates of the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) were all lower than their variable rates. Variable rates ranged from 4.11% to 6.10%, while fixed rates were between 3.97% and 5.74%. Internet banks offered even lower mortgage rates. For example, KakaoBank’s fixed-rate loans ranged from 3.757% to 6.386%.

With the competitiveness of fixed rates increasing, most new mortgage loans are being issued with fixed rates. According to the Bank of Korea, 80.7% of new mortgage loans from deposit banks in April chose fixed rates. This was the highest level in 3 years and 2 months since February 2020 (80.8%), when the base rate had dropped to 1.25% due to the impact of COVID-19.

A customer is receiving consultation at the bank loan consultation desk. Photo by Kang Jin-hyung aymsdream@

A representative from a commercial bank explained, "The recent popularity of fixed rates is mainly due to financial authorities actively encouraging banks to increase the proportion of fixed-rate loans, which led banks to lower the additional margins on fixed rates. Combined with the downward trend in interest rates, fixed rates have become cheaper than variable rates, causing a shift in preference."

The share of household loans with interest rates below 3% has noticeably increased, reflecting the downward trend in rates. As of April, 10.7% of new household loans from deposit banks had rates in the 3% range. This was up from just 2.2% in February, showing a clear increase as rates fell. Meanwhile, the share of loans with rates in the 5% range dropped from 20.6% to 11.8%.

As bank interest rates declined, there was even a phenomenon where policy products like the Bogeumjari Loan had relatively higher rates. The Special Bogeumjari Loan, a long-term fixed-rate mortgage product offered by the Korea Housing Finance Corporation, had an interest rate of 4.26% as of April. During the same period, the Bank of Korea’s data showed that the fixed-rate mortgage loan interest rate for deposit banks (based on new loans) was 4.19%, which was lower than the Special Bogeumjari Loan rate.

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