The average interest rate on home mortgage loans at deposit-taking banks hit 4.36 percent per annum last month, the highest in two years and seven months. With variable rates continuing to stay below fixed rates, the share of fixed-rate mortgages fell to its lowest in 12 years and four months.
According to weighted average interest rate statistics released by the Bank of Korea on Tuesday, the weighted average rate on new mortgage loans at deposit-taking banks stood at 4.36 percent per annum in June, up 0.04 percentage point from the previous month. It was the highest since November 2023, when the rate was 4.48 percent — a gap of two years and seven months.
The overall household loan rate also rose 0.04 percentage point to 4.5 percent. The unsecured personal loan rate climbed 0.23 percentage point to 5.72 percent, the highest since December last year, when it stood at 5.87 percent. The increase was also the largest since December last year, when it rose 0.41 percentage point. The jeonse loan rate rose 0.1 percentage point to 4.07 percent.
The share of fixed-rate mortgages among all new home loans fell 3.9 percentage points to 37.7 percent. It has declined for eight consecutive months since November last year, when it stood at 90.2 percent, dropping to its lowest since February 2014, when it was 31.8 percent — a gap of 12 years and four months.
The fixed-rate share of all new household loans also shrank 1.9 percentage points, from 24.6 percent to 22.7 percent. The 11th consecutive monthly decline brought it to its lowest since July 2022, when it was 21.4 percent — a gap of three years and 11 months.
Kim Ji-eun, a deputy director at the Bank of Korea's financial statistics team, said that while fixed mortgage rates rose due to increases in benchmark rates and the Bogeumjari loan rate, the overall mortgage rate increase was limited because borrowers increasingly opted for variable-rate products, which carry relatively lower rates. She added that for unsecured personal loans, rates rose more sharply than mortgage rates as short-term bank bond yields — the benchmark for such loans — surged, and some banks saw a higher proportion of lending to borrowers with low to mid-range credit scores.
Lee Hye-young, head of the Bank of Korea's financial statistics team, said the decline in the fixed-rate mortgage share reflected the fact that "variable rates have continued to stay below fixed rates, so many borrowers are choosing the lower-rate option." She went on to say "the gap between variable and fixed rates has persisted through recent months, so the preference for variable rates looks set to continue for now," but added that "because benchmark interest rate hikes are pushing up short-term rates — which affect variable rates — by a larger margin, the gap could narrow, and there is a possibility that the share of fixed-rate choices will rise with some lag."
On concerns about financial stability risks from the growing share of variable-rate loans, she said that "on an outstanding-balance basis, the fixed-rate share has not fallen as sharply as the new-loan figures suggest," but cautioned that "on a new-loan basis, the fixed-rate share is on a declining trend, so it warrants attention."
The corporate loan rate in June rose 0.14 percentage point from the previous month to 4.27 percent, the highest since March last year, when it stood at 4.32 percent — a gap of one year and three months.
Rising short-term market rates pushed up lending rates for large corporations to 4.17 percent, up 0.07 percentage point, and for small and medium-sized enterprises to 4.38 percent, up 0.23 percentage point. The large-corporate rate was the highest since March last year, when it was 4.32 percent, while the SME rate was the highest since February last year, when it was 4.45 percent. The increase in the SME lending rate was the largest since November 2022, when it rose 0.44 percentage point — a gap of three years and seven months.
With both household and corporate lending rates rising, the overall bank lending rate climbed 0.12 percentage point, from 4.19 percent to 4.31 percent.
The rate on new savings deposits rose 0.15 percentage point from the previous month to 3.08 percent. It was the first time the savings deposit rate had returned to the 3 percent range since January last year, when it stood at 3.07 percent — a gap of one year and five months.
The rate on pure savings deposits such as fixed-term deposits rose 0.14 percentage point to 3.02 percent, while the rate on market-linked financial products such as bank bonds and certificates of deposit rose 0.23 percentage point to 3.36 percent.
The spread between new lending rates and savings deposit rates at banks — a measure of bank margins — narrowed 0.03 percentage point to 1.23 percentage points, marking five consecutive months of contraction.
The spread based on outstanding balances narrowed 0.01 percentage point to 2.27 percentage points.
Deposit rates at non-bank financial institutions — based on one-year fixed-term deposits — all rose: mutual savings banks climbed 0.35 percentage point to 3.74 percent, credit unions rose 0.18 percentage point to 3.43 percent, mutual finance cooperatives gained 0.12 percentage point to 3.10 percent, and saemaul credit cooperatives rose 0.32 percentage point to 3.53 percent.
On the lending side, mutual savings banks and saemaul credit cooperatives saw their rates fall — by 0.38 percentage point to 9.48 percent and by 0.21 percentage point to 4.67 percent, respectively — while credit unions and mutual finance cooperatives saw increases of 0.20 percentage point to 5.02 percent and 0.09 percentage point to 4.76 percent, respectively.
kimstar@heraldcorp.com
