Mortgage Loan Interest Rates Turn Down After 6 Months

Bank of Korea Announces November Weighted Average Interest Rates for Financial Institutions
"Fixed-Rate Proportion Also ↓... Reflecting Expectations of Interest Rate Cuts"

Last month, the interest rate on bank mortgage loans fell to 4.48%, marking a decline for the first time in six months.

The proportion of fixed-rate mortgage loans decreased by 10.5 percentage points from 67.2% to 56.7%, and as a result, the share of fixed interest rates in household loans also dropped by 7.1 percentage points from 46.4% to 39.3%. These are the lowest levels since September 2022 (50.1%) and November 2022 (36.8%), respectively.

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 household loans at deposit banks in November (weighted average based on new loan amounts) remained steady at 5.04% year-on-year, the same as the previous month.

The household loan interest rate had shown an upward trend for four consecutive months from July (4.80%) through August (4.83%), September (4.90%), and October (5.04%). Last month, although mortgage loan rates declined, increases in jeonse deposit loans (+0.12 percentage points) and general unsecured loans (+0.04 percentage points) kept the overall rate at the previous month's level.

For mortgage loans, fixed rates (4.47%) fell by 0.06 percentage points, and variable rates (4.49%) decreased by 0.15 percentage points.

Seo Jeong-juk, head of the Financial Statistics Team at the Bank of Korea's Economic Statistics Department, commented on the reduced share of fixed interest rates, saying, "It appears to reflect expectations of an interest rate cut, and future prospects will likely depend on market conditions and the monetary policy directions of major countries. We need to monitor the market situation closely."

Jeonse deposit loan rates rose by 0.12 percentage points to 4.40%.

Corporate loan interest rates increased by 0.03 percentage points to 5.36% compared to the previous month. Interest rates for large corporations (5.29%) decreased by 0.01 percentage points, while those for small and medium-sized enterprises (5.42%) rose by 0.07 percentage points.

The overall loan interest rate, reflecting both household and corporate loans, rose by 0.02 percentage points to 5.26% in one month. This marks a continuous increase for three months since August (5.10%).

The average interest rate on savings deposits at deposit banks rose by 0.04 percentage points to 3.99%. Seo explained, "This was mainly due to the continued efforts by banks to secure deposits, which led to increases in pure savings deposits such as time deposits."

Pure savings deposits (3.96%) increased by 0.05 percentage points, mainly driven by time deposits (+0.04 percentage points), and market-based financial products (4.08%) rose by 0.01 percentage points.

The interest rate spread between loan rates and savings deposit rates at banks, based on new loan amounts, narrowed for the third consecutive month to 1.27 percentage points. This was due to deposit rates rising more sharply than loan rates. However, the interest rate spread based on outstanding balances widened by 0.01 percentage points to 2.48 percentage points.

Among financial institutions other than banks, deposit interest rates (1-year fixed deposits and deposits) fell by 0.12 percentage points at mutual savings banks (4.19%) and by 0.04 percentage points at Saemaeul Geumgo (4.49%), while credit cooperatives (4.25%) and mutual finance (4.09%) increased by 0.06 percentage points and 0.16 percentage points, respectively.

Loan interest rates at mutual savings banks (11.78%) dropped by 0.78 percentage points, whereas credit cooperatives (6.21%) rose by 0.12 percentage points, and mutual finance (5.82%) and Saemaeul Geumgo (6.10%) increased by 0.22 percentage points and 0.02 percentage points, respectively.