'Minus Account' Interest Rate, Which Approached 7%, Also Drops to the 5% Range

The average interest rate on credit line loans (overdraft loans) at the five major banks, which had approached 7%, has fallen to the 5% range.

According to the Korea Federation of Banks on the 27th, the average interest rate on credit line loans handled by the five major banks in April was 5.71%, down 0.312 percentage points from 6.022% in the previous month. The average interest rate on credit line loans at the five major banks was close to 7% at 6.962% in November last year, but it has steadily declined this year and dropped to the 5% range.

Looking at each bank, the average interest rate on credit line loans handled in April was highest at NH Nonghyup Bank 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 of loans by interest rate range, 80% of the newly handled amounts at Woori Bank and Hana Bank were applied with interest rates in the 5% range. For Shinhan Bank it was 70.2%, NH Nonghyup Bank 54.5%, and KB Kookmin Bank 47.6%.

In the case of general unsecured loans as well, the average interest rate (excluding microfinance) dropped to the mid-5% range. The average interest rate on general unsecured loans at the five major banks was 5.488%, down 0.308 percentage points from 5.796% in the previous month.

However, despite the decline in interest rates, the change felt by borrowers is not significant. These rates are based on new loans, so they differ from the rates applied to existing borrowers, and since the interest rates on credit line loans were in the high 2% to low 3% range just two years ago, many borrowers still feel the rates are high.

Due to these factors, the balance of household credit loans is also on a downward trend. The balance of household credit loans at the five major banks stood at 109.9314 trillion won at the end of last month, down 1.0088 trillion won from 110.9402 trillion won in the previous month. A banking industry official said, "In the case of overdraft accounts, there is a strong correlation with investment flows such as stocks and real estate."