▲ A promotional banner for a mortgage loan product displays interest rates at a bank in Seoul on the 15th. (Photo: Yonhap News)
Amid rising market rates, mortgage rates have increased for two consecutive months, reaching their highest level in two years and seven months.
SME loan rates saw their largest increase in three years and seven months, while deposit rates climbed back into the 3% range for the first time in a year and five months.
According to the "Weighted Average Interest Rates of Financial Institutions" statistics released by the Bank of Korea today (the 28th), the weighted average interest rate on mortgages at deposit banks (based on newly handled loans) stood at 4.36% per annum in June, up 0.04 percentage points from the previous month and marking the highest since November 2023 (4.48%).
The overall household loan rate also rose 0.04 percentage points from the previous month to 4.50%.
General unsecured loan rates increased by 0.23 percentage points to 5.72%, the highest since December of last year (5.87%).
The margin of increase was the largest since December of last year (0.41 percentage points).
Jeonse (lump-sum housing rental deposit) loan rates (4.07%) also increased by 0.10 percentage points.
The proportion of fixed-rate mortgages fell 3.9 percentage points from the previous month to 37.7%.
This marks the eighth consecutive month of decline since November of last year (90.2%), dropping to the lowest level in 12 years and 4 months since February 2014 (31.8%).
The proportion of fixed-rate loans among all household loans also decreased by 1.9 percentage points from 24.6% to 22.7%.
Having fallen for 11 consecutive months, it reached its lowest level in 3 years and 11 months since July 2022 (21.4%).
Kim Ji-eun, Deputy Head of the Financial Statistics Team at the Bank of Korea, stated, "While fixed mortgage rates rose due to increases in benchmark rates and Bogeumjari Loan rates, the proportion of variable-rate loans, which have relatively lower rate levels, increased, limiting the upward pressure on mortgage rates."
She continued, "In the case of unsecured loans, rates rose by a larger margin than mortgages due to a sharp increase in short-term bank debentures—which serve as benchmark rates—and an increase in the proportion of loans extended to mid-to-low credit borrowers at some banks."
Regarding the declining share of fixed-rate mortgages, Lee Hye-young, Head of the Financial Statistics Team at the Bank of Korea, said, "As the situation where variable rates remain lower than fixed rates continues, many borrowers are opting for the lower-rate option."
She added, "Because the gap between variable and fixed rates has persisted until recently, the preference for variable rates is expected to continue for the time being. However, as base rate hikes cause short-term rates—which affect variable rates—to rise by a larger margin, the rate gap could narrow, raising the possibility that the proportion of borrowers choosing fixed rates may increase with a time lag."
Addressing concerns over financial stability risks stemming from the expanding share of variable-rate loans, she noted, "In terms of outstanding balances, the share of fixed-rate loans has not dropped as sharply as it has for newly handled loans. However, because the share of fixed rates is on a downward trend based on newly handled loans, it is worth monitoring closely."
Corporate loan rates in June rose 0.14 percentage points from the previous month to 4.27%, the highest in 1 year and 3 months since March of last year (4.32%).
Due to rising short-term market rates, loan rates for large corporations (4.17%) and small and medium-sized enterprises (SMEs) (4.38%) increased by 0.07 percentage points and 0.23 percentage points, respectively.
This is the highest level since March of last year (4.32%) for large corporations and February of last year (4.45%) for SMEs.
The increase in SME loan rates is the largest in 3 years and 7 months since November 2022 (0.44 percentage points).
As both household and corporate loan rates increased, the overall bank loan interest rate rose 0.12 percentage points from 4.19% to 4.31%.
The savings-type deposit rate (based on newly handled loans) rose 0.15 percentage points from the previous month to 3.08%.
This is the first time in 1 year and 5 months that savings deposit rates have returned to the 3% range, since January of last year (3.07%).
Rates for pure savings deposits such as time deposits (3.02%) and market-type financial products such as bank debentures and certificates of deposit (CDs) (3.36%) rose by 0.14 percentage points and 0.23 percentage points, respectively.
The loan-to-deposit rate spread—the difference between lending rates and savings deposit rates based on newly handled amounts at banks—stood at 1.23 percentage points, narrowing by 0.03 percentage points from the previous month and declining for the fifth consecutive month.
The loan-to-deposit rate spread based on balances was 2.27 percentage points, down 0.01 percentage points from the previous month.
Deposit rates at non-bank financial institutions (based on 1-year time deposits and deposits) all rose across the board, including mutual savings banks (3.74%, up 0.35 percentage points), credit unions (3.43%, up 0.18 percentage points), mutual finance (3.10%, up 0.12 percentage points), and Saemaul Geumgo (3.53%, up 0.32 percentage points).
As for lending rates, mutual savings banks (9.48%) and Saemaul Geumgo (4.67%) fell by 0.38 percentage points and 0.21 percentage points, respectively, while credit unions (5.02%) and mutual finance (4.76%) rose by 0.20 percentage points and 0.09 percentage points, respectively.
(Photo: Yonhap News)
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