Decline in Mortgage Loans for 6 Months... Deposit Interest Rates Down for 5 Months

by Lee Changhwan

Published 31 May.2024 12:00(KST)

A banner displaying deposit interest rates is attached to the exterior wall of a major bank in Seoul. Photo by Jinhyung Kang aymsdream@

As expectations for a base interest rate cut grow, bank deposit interest rates have declined for five consecutive months. Mortgage loan interest rates have fallen for six consecutive months.

According to the "Weighted Average Interest Rates of Financial Institutions in April 2024" released by the Bank of Korea on the 31st, the savings deposit interest rate based on new transactions at deposit banks fell by 0.05 percentage points (p) compared to the previous month. This marks a decline for five consecutive months since recording 3.85% in December last year. Pure savings deposits decreased by 0.04%p, and market-type financial products dropped by 0.11%p.

A Bank of Korea official explained, "The decline in savings deposit interest rates continues due to factors such as falling market interest rates."

The loan interest rate in April also fell by 0.08%p from the previous month to 4.77% per annum. Both corporate and household loans declined. Corporate loan interest rates showed a downward trend for both large corporations (-0.04%p) and small and medium enterprises (-0.12%p). This is due to the decline in major benchmark interest rates and banks' business expansion.

Household loans, including mortgage loans and credit loans, both decreased. In particular, the mortgage loan interest rate was 3.93%, marking a decline for six consecutive months since November last year (4.48%). The proportion of fixed-rate loans within household loans fell by 5.6%p from the previous month (44.2% → 38.6%).

A Bank of Korea official stated, "Mortgage loan interest rates fell due to adjustments in some banks' additional interest rates amid mixed movements in major benchmark interest rates."

The interest rate spread between loans and deposits narrowed from 1.27%p to 1.24%p as loan interest rates fell more than deposit interest rates compared to the previous month.

For non-bank financial institutions, both deposit interest rates (based on 1-year fixed-term deposits) and loan interest rates (based on general loans) declined except for savings banks. A Bank of Korea official explained, "In the case of savings banks, interest rates rose as the proportion of household loans increased."