Household Loan Rates Rise for Third Straight Month; Mortgage Rates Hit Highest in 2 Years and 8 Months

Household loan interest rates rose for the third consecutive month last month, driven by rising market rates.

According to the "Weighted Average Interest Rates of Financial Institutions" statistics released by the Bank of Korea today (the 26th), the weighted average interest rate on household loans at 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.

The rate has risen for three consecutive months since April (4.43%).

Among household loans, interest rates on mortgage loans (4.48%) and general unsecured credit loans (5.97%) increased by 0.12 percentage points and 0.25 percentage points, respectively.

Mortgage loan 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 deposit) loan rates also rose by 0.12 percentage points to 4.19%.

The proportion of fixed-rate mortgage loans 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%), hitting the lowest level in 12 years and five months since February 2014 (31.8%).

Kim Sung-joon, head of the Financial Statistics Team at the Bank of Korea, explained, "Because fixed rates are higher than variable rates, consumers tend to choose lower rates for now."

In fact, the fixed mortgage loan rate rose 0.23 percentage points from the previous month to 4.76%, marking 10 consecutive months of increases since October of last year (3.97%).

The variable mortgage loan rate stood at 4.35%, up 0.08 percentage points, which was 0.41 percentage points lower than the fixed rate.

Regarding the outlook for August interest rates, Team Leader Kim said, "Market rates fell at the beginning of August and are currently showing a rebounding trend," adding, "Looking at the averages, long-term rates have fallen slightly while short-term rates have risen slightly, so we need to monitor the situation until the end of the month."

Corporate loan interest rates for 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 these interest rate levels.

Total bank loan rates for both households and corporations combined dropped by 0.04 percentage points to 4.27%.

The monthly savings-type deposit (deposit) interest rate (based on newly handled amounts) stood at 3.21% per annum, rising 0.13 percentage points from the previous month.

It has increased for four straight months since April (2.92%).

Interest rates on pure savings deposits such as time deposits (3.16%) and market-type financial products such as bank bonds and CDs (certificates of deposit) (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 new loan rates and deposit rates at banks—namely the loan-to-deposit spread (1.06 percentage points)—narrowed by 0.17 percentage points.

The loan-to-deposit spread has decreased for six consecutive months since February of this year (1.43 percentage points).

The balance-based loan-to-deposit spread (2.22 percentage points) also shrank by 0.05 percentage points.

Deposit interest rates at non-bank financial institutions (based on 1-year time deposits and deposits) rose at mutual savings banks (4.21%), credit cooperatives (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.

Loan interest rates increased at mutual savings banks (10.51%), credit cooperatives (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%).
※ Please note: This article was translated by AI and may contain errors.