Bank of Korea Announces Weighted Average Interest Rate of Financial Institutions for August
Last month, the overall average loan and deposit interest rates in the banking sector continued to decline. However, household loan interest rates turned upward after three months, and mortgage loan (Judaemae) interest rates recorded a rise for the third consecutive month.
According to the 'Weighted Average Interest Rates of Financial Institutions' statistics released by the Bank of Korea on the 27th, the average interest rate on savings deposits (weighted average, based on new contracts) at deposit banks in August was 3.65% per annum, down 0.03 percentage points from the previous month.
Specifically, the pure savings deposit interest rate was recorded at 3.59%, down 0.04 percentage points, mainly due to a 0.04 percentage point decline in time deposits.
For market-type financial products, despite increases in financial bonds (0.01 percentage points) and others, the proportion of short-term instruments such as negotiable certificates of deposit (CDs) and repurchase agreements (RPs) rose, resulting in a 0.01 percentage point decrease to 3.79%.
Seo Jeong-seok, head of the Bank of Korea’s Financial Statistics Team, explained, "The interest rate on time deposits fell as the share of short-term deposits with relatively lower rates expanded. Due to concerns over interbank competition for deposits maturing from time deposits placed in the fourth quarter of last year, it is expected that time deposit rates will rise in the future, leading household and corporate depositors to operate with shorter maturities."
The overall average loan interest rate at deposit banks (weighted average, based on new contracts) in August was 5.10% per annum, down 0.01 percentage points from the previous month. This marks a decline for two consecutive months since June (5.17%).
Corporate loan interest rates fell by 0.04 percentage points to 5.21%, mainly due to a 0.08 percentage point decrease in small and medium-sized enterprise loan rates influenced by some banks lowering their additional interest rates.
In contrast, household loan interest rates rose by 0.03 percentage points to 4.83%, marking an upward turn after three months, mainly driven by mortgage loans.
The mortgage loan interest rate (4.31%) continued its upward trend for the third consecutive month since May, due to increases in the new COFIX and 5-year bank bonds.
Within mortgage loans, the variable rate, which is heavily influenced by COFIX (4.50%), rose by 0.05 percentage points, showing a larger increase than the fixed rate (4.25%), which is affected by 5-year bank bonds and rose by 0.03 percentage points.
The jeonse loan interest rate was 4.13%, down 0.01 percentage points from the previous month, while the general unsecured loan interest rate rose by 0.01 percentage points to 6.53%.
The 'loan-deposit interest rate spread,' which is the difference between loan interest rates and savings deposit interest rates based on new contracts at deposit banks, widened to 1.45 percentage points, marking an expansion after six months.
The Bank of Korea explained, "Due to differences in maturity structures, deposit interest rates fell more sharply than loan interest rates."
The proportion of fixed interest rates in household loans expanded by 1.2 percentage points to 54.1%. This was influenced by strengthened expectations of rising interest rates and an increase in the spread of mortgage loan interest rates, resulting in the fixed-rate mortgage loan share growing by 2.8 percentage points to 76.5%.
Interest rates on deposits at financial institutions other than banks rose, mainly at savings banks and Saemaeul Geumgo, as efforts to secure funds continued. Savings banks increased by 0.08 percentage points, marking a rise for the first time in five months, and Saemaeul Geumgo rose by 0.26 percentage points, marking an increase for the first time in eight months.
Loan interest rates at non-bank financial institutions declined. Savings banks fell by 0.21 percentage points, credit unions by 0.14 percentage points, and Saemaeul Geumgo by 0.07 percentage points, respectively.
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