[Loan Market Stirring] ① Mortgage Loan Rates Dropped to 3.68%... Half of Internet Bank Customers 'Switching'

[Image source=Yonhap News]

Following major commercial banks, internet-only banks are also steadily lowering their mortgage loan interest rates. As internet-only banks leverage their competitive interest rates, refinancing demand is actively increasing. However, managing asset quality, such as delinquency rates, remains a persistent challenge for internet-only banks.

K Bank announced on the 18th that it would reduce interest rates on apartment mortgage loans and jeonse (long-term deposit) loans by up to 0.2 percentage points. The fixed-mixed rate product for apartment loans now ranges from 3.69% to 4.73%. Variable rate products were also cut by up to 0.14 percentage points, with both new purchase funds and refinancing loan rates ranging from 3.95% to 5.72%. KakaoBank also lowered its rates. The lower bound of its variable mortgage loan rate dropped from the previous 3.80% to 3.68%. KakaoBank’s variable mortgage loan rates range from 3.68% to 6.56% annually. For mixed-rate products, the range is 3.48% to 6.11%, with the lower bound falling to the mid-3% range.

The decline in mortgage loan rates at internet-only banks is due to the drop in the newly originated COFIX (Cost of Funds Index), which serves as the benchmark for variable mortgage and jeonse loan interest rates, falling for the first time in a month on the 15th. According to the Korea Federation of Banks, the COFIX based on newly originated loans last month was 3.44%, down 0.12 percentage points from the previous month. Consequently, variable mortgage loan rates at major banks also decreased, but the lower bound remains in the high 3% range. The variable mortgage loan rates at the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?stand at 3.97% to 6.79% annually (as of the 16th).

As internet-only banks maintain their interest rate competitiveness, refinancing demand to switch loans to banks like KakaoBank is actively increasing. Last month, 59% of KakaoBank’s refinancing customers were those who transferred from other banks. Even before the COFIX change, KakaoBank maintained an industry-low average interest rate of 4.04% based on loan origination. KakaoBank’s refinancing contract amount last month was 560 billion KRW, a 124% increase compared to 250 billion KRW at the end of last year. Since its launch in February last year, KakaoBank’s mortgage loan balance surpassed 3 trillion KRW as of April this year.

There is also analysis that internet-only banks are aggressively increasing mortgage loans secured by collateral to offset asset quality deterioration arising from loans to medium- and low-credit borrowers. Managing delinquency rates remains an ongoing challenge for internet-only banks. KakaoBank’s delinquency rate rose to 0.58% in the first quarter of this year, up 0.09 percentage points from 0.49% in the previous quarter and 0.32 percentage points from 0.26% in the first quarter of last year, showing an upward trend. K Bank’s delinquency rate at the end of the first quarter was 0.82%, slightly improved from 0.85% at the end of last year, but still the highest among first-tier banks.

Regarding this, an internet-only bank official said, "Due to the nature of internet-only banks, delinquency rates arise because we need to maintain the proportion of credit loans to medium- and low-credit borrowers. Expanding the loan portfolio by increasing relatively safer mortgage loans will have a positive impact on asset quality management."