While commercial banks slightly raised the mortgage loan (housing loan) interest rates according to the 'June 27 household loan management plan', they are sharply lowering the interest rates on credit loans. This is to expand the scale of credit loans to defend against declining revenue. In particular, by focusing on attracting credit loans from high-credit consumers with low arrears rates, there is even a phenomenon of interest rate inversion where the interest rate on credit loans is lower than that of mortgage loans.
According to the Bank Federation on the 12th, the average interest rate on credit loans for the top-tier (Grades 1) financial consumers of the four major banks (KB Kookmin, Shinhan, Hana, Woori Bank) was 4.03% in July, which was 0.01 percentage points higher than the mortgage loan rate of 4.02% under the same conditions. The interest rate difference between the two loans was 0.2 percentage points in April, but it has effectively become the same in just three months. April was a month before the government officially announced the full implementation of the three-phase stress total debt service ratio (DSR) regulation that reduces loan limits.
In the case of Shinhan and Hana Banks, an inversion phenomenon occurred, where the interest rate on credit loans became lower than that of mortgage loans. The interest rate on credit loans for Grade 1 financial consumers at Shinhan Bank decreased from 4.51% in April to 4.03% last month, while the mortgage loan rate fell only from 4.33% to 4.1% over the same period. This means that the interest rate on credit loans has become lower than that of mortgage loans. The interest rate difference between the two loans is 0.07 percentage points. Last month, Hana Bank's credit loan interest rate (4.08%) also became lower than the mortgage loan rate (4.11%).
The interest rate difference between Woori Bank's mortgage loans and credit loans narrowed from 0.31 percentage points in April to 0.03 percentage points last month. During this period, Woori Bank lowered the interest rate on credit loans from 4.48% to 4.06%, a reduction of 0.42 percentage points. In contrast, the mortgage loan rate decreased only from 4.17% to 4.03%, a drop of 0.14 percentage points. At KB Kookmin Bank, the interest rate on credit loans (3.95%) was 0.11 percentage points higher than the mortgage loan rate (3.84%).
Generally, mortgage loans have lower interest rates than unsecured credit loans because there is collateral. However, banks are struggling to lower mortgage loan rates due to the government's household loan management orders. The mortgage loan rate for top-tier financial consumers at the four major banks has steadily fallen since April, but it rose slightly to 4.02% last month from 3.9% the previous month after the June 27 loan regulation was implemented.
On the other hand, banks are expanding the scale of credit loans while lowering interest rates to make up for the declining revenue caused by the slowdown in mortgage loans. They are particularly focusing on credit loans for high-credit consumers with low risk weights. The average credit score of financial consumers who took out credit loans from the four major banks rose from an average of 936.2 points in April to 940.7 points last month. In the case of Woori Bank, a preferential interest rate of up to 0.3 percentage points is provided for Grade 1 customers taking out credit loans.
As a result, credit loans are driving the increase in household loans. With the situation making it difficult to obtain mortgage loans, demand for credit loans has risen following forecasts that the government will introduce additional loan regulations.
As of the 7th, the household loan balance of the five major banks stood at 760 trillion 884.5 billion won, up by 1 trillion 911.1 billion won from the end of July (758 trillion 973.4 billion won). More than half of this, amounting to 1 trillion 693 billion won, was credit loans. The increase in credit loans was 886.8 billion won in April, 821.4 billion won in May, and 1 trillion 87.6 billion won in June, which dropped to 433.4 billion won last month. However, it is showing an upward trend again this month.