The Bank of Korea said on the 28th that the weighted average interest rate on new mortgage loan handling by deposit banks in June was 4.36%, up 0.03 percentage point from the previous month's 4.33%. That is because the Bank of Korea raised the benchmark rate by 0.25 percentage point for the first time in three years and six months, and the bond yields that serve as the basis for mortgage loan rates are rising. With the interest burden growing, customers are choosing variable-rate products that are relatively cheaper.
According to the "June weighted average interest rates of financial institutions" released by the Bank of Korea that day, the fixed-rate mortgage loan rate rose 0.09 percentage point from the previous month to 4.53%. It has increased for nine straight months since October last year. Because fixed-rate mortgage loans include the low-interest Bogeumjari Loan for vulnerable groups, the Bank of Korea estimates that the rate level excluding the Bogeumjari Loan is higher than the figure.
Mortgage loan rates are rising because bond yields increased along with the benchmark rate hike. The yield on five-year bank bonds (AAA) linked to fixed-rate mortgage loans rose 0.15 percentage point from 4.17% in May to 4.32% in June. The COFIX, which serves as the benchmark for variable-rate mortgage loans, recorded 3.05%, up 0.15 percentage point over the same period.
Customers are choosing variable-rate mortgage loans, which have lower rates. The share of fixed-rate mortgage loans fell 3.9 percentage points from the previous month to 37.7%. It has declined for eight consecutive months since November last year (90.2%) and is the lowest since February 2014 (31.8%). An official at the Bank of Korea said, "Market rates are on the rise," adding, "For the time being, the preference may continue for variable products with lower rates."
Rates on general unsecured credit loans also rose 0.23 percentage point from 5.49% in May to 5.72% in June. That is because the yield on bank bonds for June, which serves as the benchmark for the lending rate on credit loans, increased by 0.16 percentage point over the same period.
The household lending rate, including mortgage loans and credit loans, rose 0.04 percentage point to 4.5%. The lending rate to corporations was 4.27%, up 0.14 percentage point. The rate on savings-type deposits such as deposits and installment savings was 3.08%, up 0.15 percentage point.