The interest rate on household loans in the banking sector has fallen for two consecutive months. The decline was influenced by a drop in benchmark interest rates, particularly affecting rental housing loans and general credit loans. In contrast, the interest rate on dwelling mortgages increased slightly.

According to the 'weighted average interest rate of financial institutions' published by the Bank of Korea on the 28th, the average interest rate on household loans from deposit banks (based on new loans) was recorded at 4.65% last month, down 0.07 percentage points from the previous month (4.72%). This marks a decline for two consecutive months, following a decrease in January (-0.07%p).

A view of a loan window at a commercial bank in Seoul. /Courtesy of News1
A view of a loan window at a commercial bank in Seoul. /Courtesy of News1

Interest rates on household loans fell, particularly for rental housing loans and general credit loans. The interest rate on rental housing loans dropped from 4.34% in December of last year to 4.16% last month. During the same period, the interest rate on general credit loans fell from 6.15% to 5.58%. Both rental housing loan and general credit loan rates have decreased for two consecutive months.

In contrast, the interest rate on dwelling mortgages was recorded at 4.27%, up 0.02 percentage points. This was a rebound after a decrease in December of last year. Fixed-rate dwelling mortgages recorded an interest rate of 4.26%, while variable-rate dwelling mortgages stood at 4.34%. Both rates increased by 0.03%p and 0.02%p compared to the previous month. The proportion of fixed-rate dwelling mortgages reached 88.9% last month.

Kim Min-soo, head of the financial statistics team at the Economic Statistics Department of the Bank of Korea, noted, "While the upward trend in the additional charge for fixed-rate dwelling mortgages, which account for the majority of dwelling mortgages, has nearly halted since January of this year, the additional charge for variable-rate dwelling mortgages has continued to rise." He added, "In February, dwelling mortgage rates are expected to gradually decrease as banks begin to lower their additional charges while the benchmark interest rate of five-year bank bonds remains stable."

The interest rate on corporate loans was recorded at 4.50%, down 0.12%p. This marks the second consecutive month of decline following a decrease in December of last year (-0.14%p). Large corporations recorded an interest rate of 4.48%, while small and medium-sized enterprises recorded 4.53%. Both categories saw declines of 0.12%p compared to the previous month.

The overall loan interest rate, including household and corporate loans, was recorded at 4.53%. This reflects a decrease of 0.11%p compared to the previous month. The interest rate spread, which subtracts deposit rates from loan rates, widened to 1.46%, increasing by 0.03%p compared to the previous month, marking an expansion for five consecutive months.

The savings interest rate of deposit banks last month (based on new transactions) was recorded at 3.07%, down 0.14%p from the previous month. This marks four consecutive months of decline since October of last year (3.37%). Both rates for pure savings deposits such as time deposits (-0.14%p, 3.08%) and market-type financial products like financial bonds and certificates of deposit (-0.13%p, 3.04%) also declined.

The deposit interest rates of non-bank financial institutions, including mutual savings banks, credit unions, mutual finance, and Saemaul Geumgo, have all declined. The declines were 0.14%p for savings banks, 0.03%p for credit unions, 0.04%p for mutual finance, and 0.03%p for Saemaul Geumgo. The loan interest rates (based on general loans) rose for savings banks (+0.95%p) and Saemaul Geumgo (+0.25%p), while they fell for credit unions (-0.12%p) and mutual finance (-0.01%p).