'Share of Loans with Interest Rates in the 3% Range Rapidly Increased'... Changed New Loans

80% of New K-Bank Mortgage Loans Have Interest Rates in the 3% Range
3% Range Unsecured Loans Reappear After Disappearing from Banks
Negative Account Interest Rates Also Fall to the 5% Range

[Image source=Yonhap News]

The proportion of new household loans with interest rates in the 3% range is soaring. Mortgage loans with 3% interest rates have significantly increased, mainly through internet banks, and 3% range unsecured loans, which had disappeared until now, have started to reappear in commercial banks.

According to the 'Proportion by Interest Rate Range' disclosed by the Korea Federation of Banks on the 24th, most of the new mortgage loan amounts handled by internet banks in April were in the 3% interest rate range. KakaoBank focused 82.7%, and K Bank 75.8% in the 3.5?4% interest rate range.

A KakaoBank official explained, "The average interest rate of new mortgage loans issued last month was 3.85%," adding, "Refinancing demand is increasing, and among all new mortgage loan customers in April, 59% were refinancing customers." This interest rate level continues into May. As of the 23rd, KakaoBank's lowest mortgage loan interest rate is 3.676% for variable rates and 3.59% for fixed rates.

General unsecured loans with 3% interest rates, which disappeared after the second half of last year, have also reappeared. As of April, the proportion of 3% range loans among all general unsecured loans at KB Kookmin Bank was 3.5%. Hana Bank recorded 1.10%. A commercial bank official said, "The COFIX (Cost of Funds Index), which serves as the benchmark for bank loan interest rates, and bank bond rates have fallen, leading to a downward adjustment."

The 'Minus Account' Interest Rate, Which Was Approaching 7%, Has Dropped to the 5% Range

The average interest rate for minus account loans has also fallen to the 5% range. In April, the average interest rate for minus account loans newly handled by the five major banks was 5.71%, down 0.312 percentage points from 6.02% in the previous month. The average interest rate for minus account loans at the five major banks nearly reached 7% at 6.964% in November last year but steadily declined this year, recording the 5% range for the first time.

Looking at the average interest rates for minus accounts by bank, NH Nonghyup Bank was the highest at 5.85%, followed by Kookmin Bank at 5.73%, Woori Bank at 5.70%, Hana Bank at 5.65%, and Shinhan Bank at 5.62%. Examining the proportion by interest rate range, 80% of new loans at Woori Bank and Hana Bank were applied with interest rates in the 5% range. Shinhan Bank (70.2%), NH Nonghyup Bank (54.5%), and KB Kookmin Bank (47.6%) followed.

However, even though interest rates have fallen, it is still difficult to feel the impact. A financial sector official said, "These rates are based on new loans, so they differ from the rates applied to existing borrowers," adding, "Also, two years ago, minus account loan interest rates were in the high 2% to low 3% range, so the public still feels that 5% interest rates are high. Moreover, minus accounts are closely related to investment flows such as stocks or real estate, so although interest rates have dropped, loans are decreasing."

The outstanding balance of household credit loans at the five major banks stood at KRW 109.9314 trillion as of the end of last month, down KRW 1.0088 trillion from KRW 110.9402 trillion in the previous month.