The share of fixed rates in household loans fell below 50% for the first time in a year. The Bank of Korea (BOK) said borrowers opted for relatively less burdensome variable rates as long-term rates, which serve as the benchmark for fixed rates on mortgage loan, rose.
According to the "weighted average interest rates of financial institutions for December 2025" released by the Bank of Korea on the 27th, the share of fixed rates for newly issued household loans at deposits banks was 48.9% in December last year. That was down 5.7 percentage points (p) from November last year (54.6%), and the first time the fixed-rate share fell below 50% since December 2024 (46.8%).
The share of fixed rates also fell in mortgage loan, which accounts for the largest portion of household loans. The share of fixed rates for newly issued mortgage loans in December last year was 86.6%, the lowest since December 2024 (81.3%).
The Bank of Korea (BOK) pointed to rising long-term rates as the main reason for the decline in the fixed-rate share. Fixed rates on household loans use long-term rates such as five-year bank bonds as benchmark rates, and as expectations for a policy rate cut recently waned, long-term rates rose and fixed rates also increased, it said.
In contrast, short-term market rates such as the CD rate and three- and six-month bank bonds, which serve as benchmarks for variable rates, have recently shown a decline of around 0.1 percentage point. As a result, the gap between fixed and variable rates widened, and it is interpreted that some borrowers chose variable rates instead of fixed rates.
Kim Min-su, Head of Team of the Bank of Korea's financial statistics team, said, "In December, fixed rates on general mortgage loans excluding policy loans became slightly higher than variable rates," and added, "The difference in benchmark rates shifted borrowers' choices toward variable rates, which showed up as a decline in the fixed-rate share."
Overall household loan lending rate also continued to rise in line with changes in long-term rates. In December last year, the household loan lending rate at deposits banks was 4.35% per year on a newly issued basis, up 0.03 percentage point from the previous month. This marked a third straight month of increases since October last year (4.24%). The mortgage loan rate (4.23%) also rose 0.06 percentage point from the previous month, climbing for a third month.
Unsecured loan lending rate also rose. In December last year, the unsecured loan lending rate was 5.87% per year, up 0.41 percentage point from the previous month. The lending rate on unsecured loans varies widely by credit grade, and the Bank of Korea (BOK) said the increase was largely due to a higher share of loans to mid- to low-credit borrowers, who face relatively higher rates, in December.
There are many variables for the future rate trajectory. Kim, the Head of Team, said, "While long-term rates have risen slightly, short-term rates are falling, and the resumption of lending at the start of the year and banks' lending operation strategies could also have an impact, so additional observation is needed for the rate trend in January."