Savings banks are lowering interest rates on housing mortgage loans and credit loans for low to medium credit borrowers.
According to the Korea Federation of Savings Banks on the 21st, interest rates on major savings bank loan products were reduced, based on a disclosure of loan products for this month (new amount of handling for the previous month). The interest rate on the housing mortgage loan (variable rate) from the industry leader SBI Savings Bank was significantly lowered from 5.77% last month to a minimum of 5.35%. Until June of last year, the interest rate for this product was over 6%.
The real estate collateral (dwellings, fixed rate) loan product of Korea Investment Savings Bank also dropped from a minimum interest rate of 6.49% to 6.3%, while the household apartment mortgage loan (fixed rate) decreased from 5.14% to 5.01%. The OK Mortgage from OK Savings Bank (apartment collateral, variable rate) fell by 0.02 percentage points from 6.62%. Additionally, the major savings banks, including IBK Savings Bank, International Savings Bank, and Korea Savings Bank, have seen their housing mortgage loan rates drop.
The interest rates for credit loans for small business owners with low credit scores have also decreased. The average interest rate for SBI Savings Bank's SBI credit loan has dropped by 0.78 percentage points to 14.82% compared to the previous month (15.60%). During the same period, the NH Happy Loan from NH Nonghyup Savings Bank fell from 12.41% to 11.93%, the Welcome Bank Loan from Welcome Savings Bank decreased from 19.58% to 19.33%, and the My Loan from BNK Savings Bank went down from 14.31% to 13.4%.
These movements by savings banks are due to a reduction in funding costs as a result of the interest rate cuts. The Monetary Policy Committee of the Bank of Korea lowered the base rate consecutively in October and November of last year. The existing base rate, which was 3.50%, has now dropped to 3.00%. It is expected that the interest burden on main customers, including self-employed individuals and small business owners, will reduce further.
However, the savings bank industry explains that the rate cuts will not immediately lead to aggressive marketing or increased lending. Last year's second half saw a closure of loans for risk management reasons, and while rates have been reduced this year, financial authorities still require management of arrears and soundness, making it difficult to engage in active marketing. Therefore, savings banks are expected to focus on resolving problematic project financing at least until the first half of the year.
An official from the savings bank industry said, "It is naturally a consequence of reduced financing costs that interest rates on loan products in the industry have dropped, and the prevailing opinion in the industry is that they will continue to fall in the future," adding, "But supplying loans is another matter, and I don't expect that lower rates will lead to more loans being issued."