Mortgage Loan Interest Rates at Lowest in 2 Years and 9 Months... Declining for 9 Consecutive Months

As market interest rates declined, mortgage loan rates in the banking sector hit their lowest level in 2 years and 9 months. Mortgage loan rates have been falling for nine consecutive months since November 2023 (4.48%). The recent increases in banks' additional interest rates are expected to be reflected starting next month.

Woori Bank has raised both the upper and lower limits of its 5-year fixed-rate mortgage loan interest rates by 0.11%, while Shinhan Bank plans to increase its mortgage loan interest rates by 0.05% starting from the 15th. The photo shows a promotional notice for the Housing and Urban Fund trustee bank posted at the entrance of a Shinhan Bank branch in Seoul. Photo by Jinhyung Kang aymsdream@

According to the "July 2024 Weighted Average Interest Rates of Financial Institutions" announced by the Bank of Korea on the 30th, the loan interest rate (weighted average, based on new contracts) of deposit banks last month was 4.55% per annum, down 0.16 percentage points from the previous month.

The household loan interest rate was 4.06% per annum, down 0.2 percentage points from the previous month. Mortgage loan rates fell by 0.21 percentage points due to declines in benchmark rates such as bank bonds and COFIX, while general unsecured loans (-0.26 percentage points) and jeonse deposit loans (-0.06 percentage points) also decreased.

Kim Min-su, head of the Financial Statistics Team at the Bank of Korea's Economic Statistics Bureau, explained, "Since banks' full-scale increases in additional interest rates began after late July, these are expected to be reflected starting next month. In August, the impact of banks' additional interest rate hikes and the decline in the 5-year bank bond benchmark rate should be considered together."

Last month, the mortgage loan interest rate was 3.50% per annum, marking the lowest level in 2 years and 9 months since it recorded 3.26% in October 2021. Mortgage loan rates have been declining for nine consecutive months since November last year (4.48%).

The proportion of fixed-rate loans among household loans rose by 8.3 percentage points to 72.5%, driven by an increase in fixed-rate mortgage loans (up 1.5 percentage points). This proportion has increased for two consecutive months since June (64.2%).

The fixed-rate share of mortgage loans was 96.4%, up 1.5 percentage points from the previous month.

The corporate loan interest rate was 4.78%, down 0.10 percentage points from the previous month. This decline was influenced by falling benchmark rates such as bank bonds, leading to decreases in both large corporations (-0.11 percentage points) and small and medium-sized enterprises (-0.10 percentage points).

Last month, the interest rate on savings deposits of deposit banks (based on new contracts) was 3.41% per annum, down 0.10 percentage points from the previous month. Pure savings deposits, mainly time deposits, fell by 0.09 percentage points, while market-type financial products, centered on financial bonds and negotiable certificates of deposit (CDs), dropped by 0.17 percentage points.

The interest rate spread between loan rates and savings deposit rates, based on new contracts, narrowed by 0.06 percentage points to 1.14 percentage points compared to the previous month. The interest rate spread has been shrinking for four consecutive months since April 2024 (1.24 percentage points).

Last month, deposit interest rates at non-bank financial institutions (based on 1-year maturity time deposits) declined across credit unions (Shinhyup), mutual finance, and Saemaeul Geumgo, except for mutual savings banks. Loan interest rates rose across all except Shinhyup.