[1mm Financial Talk] Half of New Mortgage Loans Have Interest Rates in the 3% Range... Inbaeng's Bold Move

More Customers Decide to Switch from Traditional Banks to Inbank to Lower Interest Rates
3% Range Mortgage Loans from Kbank and K-Bank Become the Trend

Office worker Shin Yong-dae (42) had taken out a mortgage loan from a local agricultural cooperative and was paying an interest rate of 7.08% until a few months ago. The loan amount was 170 million KRW, with a monthly principal and interest repayment of 1.15 million KRW. Looking for ways to reduce the loan interest, he applied for a rate reduction request and lowered the rate to 6.58%, but it was still a burdensome level. Shin said, "I looked into switching to a first-tier bank, and internet banks had the lowest mortgage loan rates," adding, "When I checked the expected rate for a 35-year term, I could lower the interest rate to 3.71%." Having decided to switch, Shin immediately applied for a refinancing loan.

Mortgage loan interest rates in the 3% range have become the trend at internet banks. Last month, half of the new mortgage loans issued by KakaoBank and K Bank were at interest rates in the 3% range. People who had borrowed money mainly from commercial banks moved to internet banks to benefit from lower rates.

Focus on Loans in the 3% Range

On the 24th, the consumer portal of the Korea Federation of Banks showed a clear trend in the 'Proportion of new installment mortgage loans by interest rate range in March.'

For KakaoBank, 55.9% of the new loan amounts were concentrated in the '3.5% to less than 4%' annual interest rate range. The remaining 44.1% were all absorbed within the 4% range. Loans with interest rates between '4% and less than 4.5%' accounted for 32.3%, and those between '4.5% and less than 5%' accounted for 11.8%.

K Bank showed a similar pattern. Loans with rates between '3.5% and less than 4%' made up nearly half (45.10%) of the total new loan amount. The rest were divided between '4% to less than 4.5%' (44.3%) and '4.5% to less than 5%' (10.3%).

The spark of 3% range mortgage loans is gradually reviving even at commercial banks, but it is still at a minimal level compared to internet banks. Last month, among the five major banks, only Kookmin Bank, Shinhan Bank, and Hana Bank issued loans at 3% interest rates, accounting for only 0.3% to 2.1% of total new loans.

Looking at the average interest rates of the five major banks, NH Nonghyup Bank was at 4.48%, Hana Bank at 4.59%, Kookmin Bank at 4.73%, Shinhan Bank at 4.82%, and Woori Bank at 5.23%. These rates were higher than KakaoBank's 4.04% and K Bank's 4.09%.

Increasing Proportion of Refinancing Loans

An internet bank official said, "Commercial banks have to cover labor costs and branch management, but internet banks are non-face-to-face, so they can save costs and have better rate competitiveness than commercial banks." As of the 21st, KakaoBank's variable interest rates ranged from 3.77% to 6.66% annually, and mixed (fixed) rates ranged from 3.60% to 6.23%. K Bank's rates were 4.09% to 5.82% and 3.97% to 5.10%, respectively.

Another characteristic is the high proportion of refinancing loans where internet bank mortgage customers switch their loans from other banks. A KakaoBank official said, "Last month, the refinancing contract amount was 500 billion KRW, three times higher than the previous month, mostly customers who switched from other first-tier banks to lower their loan interest rates," adding, "As the 3% range interest rates gained word of mouth, the proportion of refinancing customers increased from 25% at the end of December last year to 31% at the end of February, and reached 57% by the end of March."