August Bank Household Loan Interest Rate 4.76%... Highest in 9 Years and 7 Months

A bank in downtown Seoul / Photo by Mun Ho-nam munonam@

Due to the consecutive base rate hikes by the Bank of Korea, the average household loan interest rate in the banking sector rose by more than 0.2 percentage points last month.

According to the 'Weighted Average Interest Rates of Financial Institutions' statistics announced by the Bank of Korea on the 30th, the household loan interest rate (weighted average, based on new contracts) of deposit banks in August was 4.76% per annum, up 0.23 percentage points from the previous month. This is the highest level in 9 years and 7 months since January 2013 (4.84%).

Among household loans, the mortgage loan interest rate (4.35%) increased by 0.19 percentage points, and the general credit loan interest rate (6.24%) rose by 0.33 percentage points.

The proportion of fixed interest rates among household loans of deposit banks, based on new contracts in August, was 24.5%, expanding by 7.0 percentage points from July (17.5%). This is the highest level in 1 year and 4 months since April last year (27.0%), and the increase (7 percentage points) is also the largest since April 2015 (18.3 percentage points).

Park Chang-hyun, head of the Financial Statistics Team at the Bank of Korea's Economic Statistics Bureau, explained the expansion of the fixed interest rate proportion by saying, "Last month, the mixed-type (fixed) mortgage loan interest rate was lower than the variable interest rate," adding, "Expectations that interest rates will continue to rise in the future also seem to have influenced this."

The corporate loan interest rate rose to 4.46% per annum, up 0.34 percentage points from July (4.12%), marking the highest level in 8 years and 1 month since July 2014 (4.54%). The large corporate loan interest rate increased by 0.39 percentage points to 4.23%, and the small and medium-sized enterprise loan interest rate rose by 0.29 percentage points to 4.65%.

Accordingly, the average overall loan interest rate (weighted average, based on new contracts) of deposit banks, reflecting both corporate and household loans, was 4.52%, up 0.31 percentage points from July (4.21%).

The average interest rate on savings deposits of deposit banks rose by 0.05 percentage points from 2.93% to 2.98% per annum. This is the highest level in 9 years and 7 months since January 2013 (3.00%).

The loan-to-deposit margin, which is the difference between the loan interest rate and the savings deposit interest rate based on new contracts at deposit banks, widened by 0.26 percentage points to 1.54 percentage points from July (1.28%).

Even on a balance basis rather than new contracts, the total deposit interest rate (1.48%) rose by 0.15 percentage points, and the total loan interest rate (3.91%) increased by 0.20 percentage points, widening the loan-to-deposit interest rate spread (2.43 percentage points) by an additional 0.05 percentage points.