December Bank Deposit and Loan Interest Rates Fall for the First Time in Four Months

Mortgage Loan Interest Rates Fall for Second Month
Due to COFIX Rise and 5-Year Bank Bond Yield Decline

Last month, bank deposit and loan interest rates turned downward for the first time in four months. Mortgage loan rates also fell for the second consecutive month.

According to the "Weighted Average Interest Rates of Financial Institutions in December 2023" released by the Bank of Korea on the 31st, the loan interest rate of deposit banks (including corporate loans and household loans) based on new transactions was 5.14% per annum, down 0.12 percentage points from the previous month. The interest rate on savings deposits also fell 0.14 percentage points from the previous month to 3.85%, due to a decline in market interest rates.

Among loan interest rates, the corporate loan rate dropped 0.07 percentage points to 5.29%, and the household loan rate fell 0.22 percentage points from the previous month to 4.82%. The mortgage loan (Judaemdae) interest rate among household loans also decreased by 0.32 percentage points to 4.16% per annum.

Seo Jeong-seok, head of the Financial Statistics Team at the Bank of Korea’s Economic Statistics Bureau, explained that the reason for the decline in mortgage loan rates was "the fall in the 5-year bank bond yield despite the rise in the Cost of Funds Index (COFIX) and the increase in special Bogeumjari loan rates."

The proportion of fixed interest rates among household loans (based on new transactions) rose 4.5 percentage points from the previous month to 43.8%. The share of fixed interest rates in mortgage loans also increased by 3.1 percentage points to 59.8%. Seo said, "This appears to be due to an increase in mixed-type mortgage loans as the 5-year bank bond yield dropped significantly."

Mixed-type mortgage loans apply fixed interest rates for a certain period such as 3, 5, 7, or 10 years, and thereafter apply variable interest rates (COFIX + spread) until maturity.

Meanwhile, loan interest rates at non-bank financial institutions (based on general loans) rose across the board except for mutual finance institutions. Compared to the previous month, mutual savings banks increased by 0.81 percentage points, credit cooperatives by 0.01 percentage points, and Saemaeul Geumgo by 0.04 percentage points. Mutual finance remained unchanged from the previous month.

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