[1mm Financial Talk] Half of New Mortgage Loans Have Interest Rates in the 3% Range... Inbaeng's Bold Move

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Office worker Shin Yong-dae (42) had taken out a mortgage loan from a local agricultural cooperative and was paying an interest rate of 7.08% until a few months ago. The loan amount was 170 million KRW, with a monthly principal and interest repayment of 1.15 million KRW. Looking for ways to reduce the loan interest, he applied for a rate reduction request and lowered the rate to 6.58%, but it was still a burdensome level. Shin said, "I looked into switching to a first-tier bank, and internet banks had the lowest mortgage loan rates," adding, "When I checked the expected rate for a 35-year term, I could lower the interest rate to 3.71%." Having decided to switch, Shin immediately applied for a refinancing loan.

Mortgage loan interest rates in the 3% range have become the trend at internet banks. Last month, half of the new mortgage loans issued by KakaoBank and K Bank were at interest rates in the 3% range. People who had borrowed money mainly from commercial banks moved to internet banks to benefit from lower rates.

On the 24th, the consumer portal of the Korea Federation of Banks showed a clear trend in the 'Proportion of new installment mortgage loans by interest rate range in March.'

For KakaoBank, 55.9% of the new loan amounts were concentrated in the '3.5% to less than 4%' annual interest rate range. The remaining 44.1% were all absorbed within the 4% range. Loans with interest rates between '4% and less than 4.5%' accounted for 32.3%, and those between '4.5% and less than 5%' accounted for 11.8%.

K Bank showed a similar pattern. Loans with rates between '3.5% and less than 4%' made up nearly half (45.10%) of the total new loan amount. The rest were divided between '4% to less than 4.5%' (44.3%) and '4.5% to less than 5%' (10.3%).

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The spark of 3% range mortgage loans is gradually reviving even at commercial banks, but it is still at a minimal level compared to internet banks. Last month, among the five major banks, only Kookmin Bank, Shinhan Bank, and Hana Bank issued loans at 3% interest rates, accounting for only 0.3% to 2.1% of total new loans.

Looking at the average interest rates of the five major banks, NH Nonghyup Bank was at 4.48%, Hana Bank at 4.59%, Kookmin Bank at 4.73%, Shinhan Bank at 4.82%, and Woori Bank at 5.23%. These rates were higher than KakaoBank's 4.04% and K Bank's 4.09%.

An internet bank official said, "Commercial banks have to cover labor costs and branch management, but internet banks are non-face-to-face, so they can save costs and have better rate competitiveness than commercial banks." As of the 21st, KakaoBank's variable interest rates ranged from 3.77% to 6.66% annually, and mixed (fixed) rates ranged from 3.60% to 6.23%. K Bank's rates were 4.09% to 5.82% and 3.97% to 5.10%, respectively.

Another characteristic is the high proportion of refinancing loans where internet bank mortgage customers switch their loans from other banks. A KakaoBank official said, "Last month, the refinancing contract amount was 500 billion KRW, three times higher than the previous month, mostly customers who switched from other first-tier banks to lower their loan interest rates," adding, "As the 3% range interest rates gained word of mouth, the proportion of refinancing customers increased from 25% at the end of December last year to 31% at the end of February, and reached 57% by the end of March."

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