The weighted average interest rate on mortgage loans based on new transactions at deposit banks in May was 4.32%, up 0.01 percentage point from the previous month's 4.31%, the Bank of Korea said on the 26th. It fell 0.03 percentage point in April but turned upward again. The mortgage loan rate rose for six straight months from Oct. to Mar. As interest burdens have grown, customers are choosing relatively cheaper variable-rate mortgages.
Rates are trending higher because market rates linked to mortgages are rising. According to the "weighted average interest rates of financial institutions in May" released by the Bank of Korea that day, the yield on five-year bank bonds (AAA), which affects fixed-rate mortgages, rose 0.29 percentage point to 4.17% in May from 3.88% in April. The COFIX rate, the benchmark for variable-rate mortgages, also rose 0.01 percentage point over the same period to 2.9%.
Customers are choosing variable-rate mortgages with lower interest rates. The share of fixed-rate mortgages came to 41.6%, down 6.2 percentage points from the previous month. It was the lowest in 59 months since June 2021 (39.5%). The fixed-rate share among all household loans was 24.6%, down 3.2 percentage points. That was the lowest since July 2022 (21.4%).
A Bank of Korea official said, "Benchmark rates continue to trend upward, but mortgage rates have not risen by as much," and added, "The June rate will also vary depending on whether customers choose variable or fixed products."
The overall household lending rate, including mortgages, rose 0.03 percentage point to 4.46%. That reflected guaranteed loans, which rose 0.01 percentage point to 4.11%. General unsecured loans fell 0.14 percentage point to 5.49%.
The corporate lending rate was tallied at 4.13%, down 0.01 percentage point. Large corporate loans rose 0.01 percentage point to 4.1%, while small and midsize corporate loans fell 0.03 percentage point to 4.15%.