October Bank Household Loan Interest Rate '5.04%' Rises for Third Consecutive Month... Mortgage Loans Also Soar

Bank of Korea October Financial Institution Weighted Average Interest Rate

As the key benchmark interest rates, including bank bonds and COFIX rates, rose, the average interest rate on household loans in the banking sector exceeded 5% again last month, marking a continuous increase for three consecutive months. In particular, mortgage loan rates rose for the fifth consecutive month to 4.56%.

According to the 'Weighted Average Interest Rates of Financial Institutions' statistics released by the Bank of Korea on the 28th, the average interest rate on household loans (weighted average, based on new contracts) at deposit banks in October was 5.04% per annum, up 0.14 percentage points from the previous month.

(Data provided by the Bank of Korea)

The household loan interest rate has been on the rise for three consecutive months from August (4.83%) and September (4.90%) following July (4.80%) through October.

By loan type, mortgage loans increased by 0.21 percentage points to 4.56%, and general unsecured loans rose by 0.22 percentage points to 6.81%. Mortgage loan rates have risen for five consecutive months, while general unsecured loan rates have increased for four consecutive months.

For mortgage loans, fixed interest rates (4.53%) rose by 0.23 percentage points, and variable interest rates (4.64%) increased by 0.13 percentage points.

The proportion of fixed-rate mortgage loans decreased by 8.0 percentage points from 75.2% to 67.2%, and as a result, the share of fixed interest rates in household loans also dropped by 5.8 percentage points from 52.2% to 46.4%.

Jeonse deposit loans also rose by 0.10 percentage points to 4.28%.

Corporate loan interest rates increased by 0.06 percentage points to 5.33% compared to the previous month. Interest rates for large corporations (5.30%) and small and medium-sized enterprises (5.35%) rose by 0.12 percentage points and 0.01 percentage points, respectively.

The overall loan interest rate, reflecting both household and corporate loans, rose by 0.07 percentage points in one month to 5.24%. This marks a continuous increase for two consecutive months since August (5.10%).

Seo Jeong-seok, head of the Bank of Korea’s Financial Statistics Team, explained that the rise in bank bond rates, a key benchmark interest rate, appears to be most significantly influenced by U.S. Treasury yields.

The average interest rate on savings deposits at deposit banks rose by 0.14 percentage points to 3.95%.

Pure savings deposits (3.91%) increased by 0.17 percentage points, mainly driven by time deposits (+0.18 percentage points), and market-type financial products (4.07%) rose by 0.11 percentage points, led by financial bonds (+0.14 percentage points) and CDs (+0.09 percentage points).

The interest rate spread between loans and deposits, based on new contracts at banks, narrowed for two consecutive months to 1.29 percentage points due to deposit rates rising more sharply than loan rates. The interest rate spread based on outstanding balances also narrowed by 0.02 percentage points to 2.47 percentage points.

Regarding the outlook for loan interest rates in November, the Bank of Korea stated that since bank bonds and COFIX are moving in different directions, further observation is needed.

Team leader Seo said, "Speaking only about the weighted average interest rate, bank bonds have fallen by an average of 0.3 percentage points through the 24th of this month, but COFIX, another benchmark interest rate, has risen by 1.5 percentage points. I think the impact of bank bonds might be slightly greater, but we need to wait for the exact figures."

(Data provided by the Bank of Korea)

Interest rates on deposits (1-year fixed deposits and trust funds) at financial institutions other than banks rose by 0.04 percentage points at mutual savings banks (4.31%), 0.17 percentage points at credit cooperatives (4.19%), and 0.16 percentage points at mutual finance (3.93%). Saemaeul Geumgo remained unchanged at 4.53%.

Loan interest rates increased by 0.80 percentage points and 0.01 percentage points at mutual savings banks (12.56%) and credit cooperatives (6.09%), respectively, while mutual finance (5.60%) and Saemaeul Geumgo (6.08%) saw decreases of 0.07 percentage points and 0.09 percentage points, respectively.

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