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Household loan interest rates rose for the third consecutive month last month, driven by factors such as rising market rates.
According to the weighted average interest rate statistics of financial institutions released by the Bank of Korea today (the 26th), the weighted average interest rate on household loans by deposit-taking banks (based on newly handled loans) stood at 4.64% per annum in July, up 0.14 percentage points from the previous month.
Rates have risen for three straight months following April (4.43%).
Among household loans, mortgage rates (4.48%) and general unsecured credit loan rates (5.97%) increased by 0.12 percentage points and 0.25 percentage points, respectively.
Mortgage rates reached their highest level in two years and eight months since November 2023 (4.48%), while general credit loan rates hit their highest in one year and seven months since December 2024 (6.15%).
Jeonse (lump-sum housing deposit) loan rates also rose by 0.12 percentage points to 4.19%.
The proportion of fixed-rate mortgages stood at 31.9%, down 5.8 percentage points from the previous month.
The proportion has declined for nine consecutive months since November of last year (90.2%), marking the lowest level in 12 years and five months since February 2014 (31.8%).
Kim Seong-jun, head of the Financial Statistics Team at the Bank of Korea, explained, "Because fixed rates are higher than variable rates, consumers tend to opt for lower rates in the short term."
In fact, the fixed mortgage rate rose 0.23 percentage points from the previous month to 4.76%, marking 10 consecutive months of increase since October of last year (3.97%).
The variable mortgage rate rose 0.08 percentage points to 4.35%, which was 0.41 percentage points lower than the fixed rate.
Regarding the outlook for August interest rates, Kim said, "Market rates fell in early August before turning upward again. On average, long-term rates have dropped slightly while short-term rates have risen slightly, so we need to monitor the situation until the end of the month."
Corporate loan rates in July averaged 4.20%, down 0.07 percentage points from the previous month.
While large corporate loan rates rose 0.01 percentage points to 4.18%, small and medium-sized enterprise (SME) loan rates fell 0.16 percentage points to 4.22%.
The Bank of Korea analyzed that banks' expansion of productive finance and commercial judgments appeared to have influenced the rate levels.
Total bank lending rates encompassing both households and corporations fell 0.04 percentage points to 4.27%.
Monthly savings-type deposit rates (based on newly handled amounts) averaged 3.21% per annum, up 0.13 percentage points from the previous month.
Rates have risen for four straight months since April (2.92%).
Rates on pure savings deposits such as time deposits (3.16%) and market-type financial products such as bank debentures and certificates of deposit (CDs) (3.48%) rose by 0.14 percentage points and 0.12 percentage points, respectively.
As overall bank lending rates fell while deposit rates rose, the difference between newly handled bank loan rates and deposit rates—namely, the loan-deposit spread (1.06 percentage points)—narrowed by 0.17 percentage points.
The loan-deposit spread has shrunk for six consecutive months since February of this year (1.43 percentage points).
The loan-deposit spread based on outstanding balances (2.22 percentage points) also decreased by 0.05 percentage points.
Deposit rates at non-bank financial institutions (based on one-year time deposits and deposits) rose at mutual savings banks (4.21%), credit unions (3.56%), and mutual finance institutions (3.25%) by 0.47 percentage points, 0.13 percentage points, and 0.15 percentage points, respectively.
Only Saemaul Geumgo (3.48%) saw a decline of 0.05 percentage points.
Lending rates increased at mutual savings banks (10.51%), credit unions (5.16%), and Saemaul Geumgo (5.15%) by 1.03 percentage points, 0.14 percentage points, and 0.48 percentage points, respectively, while falling by 0.15 percentage points at mutual finance institutions (4.61%).
(Photo: Yonhap News)
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