Household loan rate hits 4.96%, highest in 2 years and 10 months

Credit loan rate up 0.16 percentage points; jeonse loan rate up 0.22 points

Deposit rate rises 0.24 points; lending-deposit rate gap narrows

Bank of Korea: bank bond yields falling this month, but data still coming in

Customers consult with staff at a KB Kookmin Bank branch in central Seoul. [Herald DB]
Customers consult with staff at a KB Kookmin Bank branch in central Seoul. [Herald DB]

Bank mortgage rates last month climbed to their highest level in 14 years and five months, with the fixed-rate mortgage rate surpassing 5 percent annually for the first time since records began.

According to the Bank of Korea's weighted average interest rate data for financial institutions, released Thursday, the weighted average rate on new household loans at deposit-taking banks stood at 4.96 percent per annum last month — up 0.2 percentage points from the previous month and the highest since November 2023, when the rate was 5.04 percent.

The weighted average household loan rate has risen 0.53 percentage points over five months since April, when it stood at 4.43 percent.

Among household loans, the mortgage rate rose 0.22 percentage points to 4.88 percent, the general credit loan rate climbed 0.16 percentage points to 6.49 percent, and the jeonse loan rate gained 0.22 percentage points to 4.57 percent.

The mortgage rate was the highest since April 2012, when it reached 4.94 percent — a gap of 14 years and five months. The general credit loan rate was the highest since December 2023, when it stood at 6.58 percent, marking a 2-year, 9-month high.

The fixed-rate mortgage rate rose 0.23 percentage points to 5.11 percent, extending a 12-month consecutive increase that began in October last year, when the rate was 3.97 percent. The rate topping 5 percent marks the first time since the Bank of Korea began compiling the relevant data in January 2013.

The variable-rate mortgage rate also rose 0.23 percentage points to 4.76 percent.

Fixed-rate mortgages accounted for 34.2 percent of all new mortgage lending, down 1.1 percentage points from the previous month.

Kim Seong-jun, head of the Bank of Korea's financial statistics team, said the primary driver of higher lending rates was a broad market rate increase of roughly 0.2 percentage points following the benchmark interest rate hike in August. "For fixed-rate mortgages, bank bond yields — the benchmark rate — rose 1.54 percentage points from October last year through September this year, which contributed significantly to the increase," Kim said.

Kim added that through Friday, the certificate of deposit rate had risen 0.07 percentage points this month while the five-year bank bond yield had fallen 0.16 percentage points. "If lending rates follow the benchmark, there is a possibility they could fall, but spread adjustments are also a factor, so we will need to watch the data through the end of the month," Kim said.

The corporate loan rate in September rose 0.19 percentage points from the previous month to 4.49 percent.

The rate for large corporations climbed 0.16 percentage points to 4.37 percent, while the rate for small and medium-sized enterprises rose 0.25 percentage points to 4.63 percent.

The overall bank lending rate, covering both household and corporate loans, rose 0.17 percentage points to 4.57 percent.

The savings deposit rate for new contracts in September rose 0.24 percentage points from the previous month to 3.45 percent per annum.

The rate on pure savings deposits such as time deposits rose 0.25 percentage points to 3.39 percent, while the rate on market-type instruments such as financial bonds and certificates of deposit gained 0.16 percentage points to 3.69 percent.

The spread between new lending rates and deposit rates at banks narrowed 0.07 percentage points to 1.12 percentage points. The spread based on outstanding balances widened 0.01 percentage points to 2.21 percentage points.

Among non-bank financial institutions, one-year time deposit rates rose at credit unions (up 0.07 percentage points to 3.69 percent), mutual finance cooperatives (up 0.05 percentage points to 3.44 percent) and saemaul credit cooperatives (up 0.05 percentage points to 3.62 percent). Mutual savings banks were the exception, with their deposit rate falling 0.07 percentage points to 3.81 percent.

On the lending side, rates fell at mutual savings banks (down 0.43 percentage points to 9.8 percent), credit unions (down 0.03 percentage points to 5.25 percent) and saemaul credit cooperatives (down 0.2 percentage points to 4.97 percent), while mutual finance cooperatives saw their lending rate rise 0.16 percentage points to 5.09 percent.


kimstar@heraldcorp.com