Bank of Korea's 'Weighted Average Interest Rate of Financial Institutions in March'
Bank Mortgage Loan Rates Decline for 5 Consecutive Months
Jeonse Loan and General Credit Loan Rates Decline for 4 Consecutive Months
As key benchmark interest rates such as COFIX (Cost of Funds Index) declined, bank mortgage loan interest rates fell for the fifth consecutive month. Interest rates on major household loans, including jeonse deposit loans and general credit loans, also decreased for the fourth consecutive month.
According to the "March Weighted Average Interest Rates of Financial Institutions" released by the Bank of Korea on the 29th, the weighted average interest rate on household loans (based on new loan amounts) in March was 4.5% per annum, up 0.01 percentage points from the previous month. After declining from December last year (4.82%) to January (4.68%) and February (4.49%), it slightly increased for the first time in four months.
A real estate mortgage loan interest rate board is posted on the exterior wall of a branch of a major bank in Seoul. Photo by Jinhyung Kang aymsdream@
Seo Jeong-seok, head of the Financial Statistics Team at the Bank of Korea's Financial Statistics Department, explained, "Due to the decline in key benchmark interest rates such as bank bonds and COFIX, interest rates on mortgage loans, jeonse deposit loans, and general credit loans all decreased." However, he added, "While mortgage and jeonse deposit loan issuance decreased compared to the previous month, relatively higher interest rate credit loans increased, causing the overall household loan interest rate to rise slightly." He further noted, "The increase in the proportion of general credit loans is due not only to the decline in benchmark interest rates but also to some banks actively promoting credit loans."
The interest rate on mortgage loans, which make up household loans, was 3.94% per annum, down 0.02 percentage points from the previous month. Mortgage loan interest rates have been falling for five consecutive months since November last year (4.48%), with rates of 4.16% in December, 3.99% in January, 3.96% in February, and 3.94% in March.
Jeonse deposit loan and general credit loan interest rates also declined for four consecutive months. The interest rate on jeonse deposit loans in March was 3.94% per annum, continuing the downward trend since December last year (4.09%). The interest rate on general credit loans in March was 6.14% per annum, also declining continuously since December last year (6.58%).
The proportion of fixed-rate loans within household loans was 44.2%, down 5.5 percentage points from the previous month. This marked a reversal to a decline after four months since December last year (43.8%). The proportion of fixed-rate loans within mortgage loans was 57.5%, down 8.1 percentage points from the previous month, continuing a two-month decline since February this year (65.6%).
Seo explained, "The reduction in fixed-rate mortgage loans is due to a decrease in the handling of Bogeumjari Loan, a pure fixed-rate product, caused by policy mortgage supply centered on Didimdol Loans, and a significant drop in COFIX, the benchmark rate for variable-rate products." He added, "The proportion of fixed-rate household loans decreased as general credit loans, which are variable-rate products, increased."
The interest rate on savings deposits in March was 3.58% per annum, down 0.05 percentage points from the previous month. The pure savings deposit interest rate was 3.54%, declining 0.06 percentage points mainly due to time deposits (-0.06 percentage points). The interest rate on market-type financial products was 3.73%, down 0.02 percentage points, mainly due to financial bonds (-0.01 percentage points) and CDs (-0.06 percentage points).
The loan interest rate, including corporate and household loans, was steady at 4.85% from the previous month. While corporate loan rates declined, household loan rates rose slightly. Corporate loan interest rates in March were 4.96%, down 0.07 percentage points from the previous month, marking a four-month consecutive decline since December last year (5.29%). Large corporate loan rates fell 0.1% to 5.01%, and small and medium-sized enterprise loan rates decreased 0.05 percentage points to 4.93%.
The interest rate spread between loans and deposits, calculated by subtracting the savings deposit interest rate from the loan interest rate based on new loan amounts, widened after one month due to a decline in deposit rates. In March, the loan-deposit interest rate spread was 1.27 percentage points, expanding 0.05 percentage points from the previous month.
Interest rates on deposits (1-year maturity time deposits and new contract amounts) and loans (general loans and new contract amounts) at non-bank financial institutions all declined. Deposit rates fell at savings banks (-0.02 percentage points), credit unions (-0.10 percentage points), mutual finance institutions (-0.07 percentage points), and Saemaeul Geumgo (-0.12 percentage points). Loan rates also decreased at savings banks (-0.70 percentage points), credit unions (-0.13 percentage points), mutual finance institutions (-0.09 percentage points), and Saemaeul Geumgo (-0.04 percentage points).
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