Mortgage and Jeonse Loan Rates Hold in the Upper 6% Range
Year-End Surge to 8% Speculation Subsides
Financial Authorities' Rate Watch Signals Slow the Uptrend
[Asia Economy Reporter Minwoo Lee] Bank loan interest rates are showing a slight decline. While the overall financial bond market interest rates are stabilizing, financial authorities have also stated they will monitor loan interest rates, which appears to have exerted pressure.
According to the financial sector on the 15th, the mortgage loan interest rates at the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?range from 4.78% to 6.76% (fixed rate basis). The upper limit has now dropped to the 6% range. The lower limit has already fallen to the 4% range. Considering that the upper limit had remained in the 7% range and there were even forecasts of it rising to the 8% range within the year, the atmosphere appears somewhat stabilized.
This is interpreted as an effect of the slight decline in the 5-year financial bond (unsecured, AAA) interest rate, which serves as the benchmark rate. According to the Korea Financial Investment Association, the 5-year financial bond interest rate was recorded at 4.565% as of the previous day. It has fallen to the 4.5% range for the first time in about three months since September 20. The high-altitude run in the 5% range, which had surged to 5.467% on October 21 marking a 12-year high, seems to have eased.
With reduced competition among banks for deposit interest rates due to regulatory pressure, the bank fund cost index (KOFIX) to be announced today is also expected to see its upward trend slow. Five major commercial banks have already discontinued 5% range fixed deposit products. This is why there is a forecast that the variable mortgage loan interest rates, which use KOFIX as the benchmark rate, will also stabilize. As of today, the variable mortgage loan interest rates at the five major commercial banks range from 4.94% to 7.36%, with the lower limit dropping to the high 4% range.
The rising trend in jeonse loan interest rates has also somewhat eased. Although the base interest rate has steadily increased, leading to expectations that jeonse loan interest rates would reach the 8% range within the year, as of today, the jeonse loan interest rates at the five major commercial banks range from 4.96% to 6.36%. This is a changed atmosphere compared to the end of last month when the upper limit was in the mid-7% range. Most of the five major banks now show the upper limit of interest rates in the low 6% range.
As financial authorities recently announced they are closely monitoring financial institutions’ loan interest rates and signaled restraint on rate hikes, banks have responded, and the rising trend in jeonse loan interest rates is also slowing. Woori Bank has already announced it will reduce jeonse loan interest rates by up to 0.85 percentage points until April 30 next year. Other commercial banks such as NH Nonghyup Bank are also reportedly reviewing whether to lower jeonse loan interest rates.
A financial sector official explained, “Banks cannot ignore government policies, and since the base interest rate rise is also expected to slow somewhat, banks are instead lowering rates and recruiting borrowers,” adding, “For the time being, banks will continue to find it difficult to raise loan interest rates recklessly.”
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