[Mortgage Transfer Boom]② 'Negative Spread' Accepted, Fierce Customer Acquisition Competition... Up to 3.1% Annual Rate

Top 5 Commercial Banks Offer Minimum Annual Interest Rate of 3.71%
Lower Than 5-Year Bank Bond Yields

As 'refinancing mortgage loans' gains attention, banks are actively competing to attract customers, even at the cost of 'negative margins.' While some express concerns about cutthroat competition among banks, the industry believes it will not be a significant issue since a high proportion of sales are conducted non-face-to-face and the actual interest rates applied to each borrower may vary.

On the 21st, a notice about mortgage loan interest rates is posted at a commercial bank in Seoul. Photo by Jinhyung Kang aymsdream@

According to the financial sector on the 25th, as of the previous day, the blended (fixed) interest rates for refinancing mortgage loan products from the five major domestic commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) were recorded at a minimum annual rate of 3.71~3.72%.

Internet-only banks and regional banks offer even lower rates than commercial banks. The refinancing product rates of KakaoBank and K Bank were found to be as low as 3.50% annually. Additionally, Gyeongnam Bank actively sells refinancing products at 3.44%, Busan Bank at 3.45%, and Gwangju Bank at 3.46%.

The refinancing product rates offered by these banks are evaluated to be close to negative margins. According to the Bond Information Center, the benchmark rate for new mortgage loan blended interest rates, the 5-year bank bond rate, was 3.861% as of the 23rd, showing a difference of 0.14~0.15 percentage points compared to the average rates of the five major banks. Each bank also applies a negative spread to the minimum interest rates.

The banks’ active sales of refinancing products despite the possibility of negative margins are interpreted as an effort to secure new customers in response to refinancing demand. Along with low interest rates, banks are attracting financial consumers considering refinancing through various events and benefits. KB Kookmin Bank offers up to 500,000 KRW in support for the first month’s loan interest to customers who complete mortgage loan refinancing via the KB Star Banking application by March 21, with applications accepted until the 31st. Among them, three customers will be selected by lottery to receive 1,000,000 KRW in cash.

Shinhan Bank also provides up to 200,000 KRW worth of 'My Shinhan Points' for the first month’s interest amount to the first 500 customers who refinance their mortgage loans through the Shinhan SOL Bank app or branches by the 29th of next month. DGB Daegu Bank, which is preparing to switch to a commercial bank, gives all customers who complete refinancing a delivery app gift certificate worth about 50,000 KRW.

However, some express concerns about cutthroat competition among banks. For example, DGB Daegu Bank applies a minimum annual interest rate in the 3.1% range for its refinancing mortgage loan products, which is lower than not only commercial banks but also competing regional and internet-only banks.

A banking industry insider said, "In the case of Daegu Bank, there is also an aspect of trying to assert its presence ahead of switching to a commercial bank, and it is understood that they have been actively handling mortgage loans since last year," adding, "However, since the preferential conditions are strict, there will not be many borrowers who actually receive the minimum interest rate." Another insider said, "Non-face-to-face channels, which have a high sales proportion, have relatively lower cost burdens," and added, "Concerns about cutthroat competition are not expected to be significant."