The Bank of Korea (BOK) said that as the rise in market interest rates since Oct. last year continues, there is a possibility that the household loans lending rate will also rise further for the time being.
The Bank of Korea (BOK) noted in the Monetary and Credit Policy Report published on the 12th that the recent increase in market interest rates is reflected with a lag, so the household loans lending rate is expected to rise further for the time being. Under the Bank of Korea Act, the Bank of Korea (BOK) submits to the National Assembly a report at least twice a year (Mar., Sep.) assessing the implementation of monetary and credit policy and the conditions for macrofinancial stability.
According to the report, as market interest rates have risen since Oct. last year, mortgage loan rates have all increased by a considerable margin. Based on new lending in Jan. this year, the banking sector's mortgage loan rate rose 6 bp (1 bp=0.01 percentage point) from the previous month to 4.29%, extending gains for a fourth straight month. This is the highest level since Jan. 2024 (4.3%).
The household loans lending rate is also continuing to rise. According to the Bank of Korea (BOK), based on new lending in Jan., the banking sector's household loans lending rate rose 15 bp from the previous month to 4.5%, marking a fourth consecutive monthly increase. This is the highest level since Dec. last year (4.72%).
The problem is that the upward trend in 5-year bank bond yields, used as a benchmark for key lending rates including mortgage loans, has not yet reversed. The 5-year bank bond yield (monthly average), which was 3.4% in Oct. last year, surged to 3.52% in Dec. last year and has continued to climb to 3.58% in Jan. this year and 3.73% in Feb.
The Bank of Korea (BOK) said, "As the impact of the recent rise in market interest rates is reflected with a lag, the household loans lending rate is expected to rise further for the time being."
Meanwhile, the Bank of Korea (BOK) assessed that the pace of growth in the scale of household loans has slowed since the second half of last year due to the government's macroprudential regulations. However, it evaluated that upside and downside factors are mixed regarding the future trend.
The rise in the household loans lending rate, the government's strong commitment to managing household debt, and tighter aggregate controls by financial institutions are expected to act as factors restraining loan growth. On the other hand, it said that if the rise in Seoul home prices spreads to the greater Seoul area or transactions of dwellings priced at 1.5 billion won or less increase, loan growth could accelerate.