Bank of Korea's 'February Weighted Average Interest Rates of Financial Institutions'
Deposit and Loan Rates Both Decline
Loan-Deposit Rate Spread Narrows for the First Time in 3 Months
The overall loan interest rates in the banking sector have been declining for three consecutive months. Both corporate loans and household loans, which make up the loan interest rates, have decreased.
According to the "Weighted Average Interest Rates of Financial Institutions in February 2024" announced by the Bank of Korea on the 29th, the loan interest rate of deposit banks (weighted average, based on new loans) in February was 4.85% per annum, down 0.19 percentage points from the previous month. It is the first time in 17 months since September 2022 (4.71%) that the overall loan interest rate has fallen to the 4% range. The overall loan interest rate has been declining for three months, recording 5.14% in December last year and 5.04% in January.
Both corporate loan interest rates and household loan interest rates, which constitute the loan interest rates, have been falling for three months. The corporate loan interest rate has been declining since 5.29% in December last year and 5.22% in January. The large corporate loan interest rate fell by 0.05 percentage points from the previous month to 5.11%, and the small and medium-sized enterprise (SME) loan interest rate dropped by 0.3 percentage points to 4.98%.
Seo Jeong-seok, head of the Financial Statistics Team at the Bank of Korea's Economic Statistics Bureau, explained that the reason for the decline in SME loan interest rates is "due to banks actively providing loans to SMEs recently."
The household loan interest rate fell by 0.19 percentage points from the previous month to 4.49%. The household loan interest rate has been declining for three months, following 4.82% in December last year and 4.68% in January.
By loan type, the mortgage loan interest rate was 3.96%, down 0.03 percentage points from the previous month. The mortgage loan interest rate has been declining for four consecutive months since November last year. Among these, the fixed-rate mortgage was 3.91%, down 0.04 percentage points from the previous month, and the variable-rate mortgage was 4.04%, down 0.05 percentage points. The general unsecured loan interest rate was 6.29%, down 0.09 percentage points from the previous month. The jeonse deposit loan interest rate was 4.02%, down 0.07 percentage points from the previous month.
Seo explained the reason for the decline in household loan interest rates as "the decline in the COFIX rate led to a decrease in mortgage loan interest rates, and the interest rates for jeonse deposit loans and general unsecured loans fell simultaneously."
The proportion of fixed interest rates in household loans increased by 0.5 percentage points from the previous month to 49.7%, as general unsecured loans, which are mostly variable-rate, decreased.
The interest rate on savings deposits at deposit banks was 3.63%, down 0.04 percentage points from the previous month. It has been declining for three months since December last year (3.85%).
The pure savings deposit interest rate was 3.60%, down 0.04 percentage points from the previous month, as regular installment savings rose by 0.45 percentage points but time deposits fell by 0.05 percentage points. Market-type financial products decreased by 0.01 percentage points to 3.75%, mainly due to financial bonds (-0.03 percentage points) and CDs (-0.01 percentage points).
The interest rate spread between loans and deposits, calculated by subtracting the savings deposit interest rate from the loan interest rate based on bank balances, narrowed by 0.15 percentage points from the previous month to 1.22 percentage points. It turned to a contraction for the first time in three months since December last year (1.29 percentage points).
Deposit interest rates (based on new contracts for one-year fixed deposits) at non-bank financial institutions all fell simultaneously: mutual savings banks (-0.16 percentage points), credit cooperatives (-0.08 percentage points), mutual finance (-0.13 percentage points), and Saemaeul Geumgo (-0.11 percentage points).
Loan interest rates (general loans, based on new contracts) fell in mutual savings banks (-0.37 percentage points), credit cooperatives (-0.08 percentage points), and mutual finance (-0.04 percentage points), except for Saemaeul Geumgo, which rose by 0.01 percentage points.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
