The mortgage rate has risen for four consecutive months, reaching its highest level in three years and nine months. The average rate for general credit loans has also climbed into the 6% range. The Bank of Korea indicated that there is a high likelihood of further increases in loan rates in September, reflecting rising market interest rates.
According to the Bank of Korea's 'Weighted Average Interest Rate' statistics released on September 30, the weighted average mortgage rate for deposit banks in August was 4.66%, an increase of 0.18 percentage points from the previous month. This marks the highest level since November 2022 (4.74%).
The overall household loan interest rate rose to 4.76%, up 0.12 percentage points, the highest since November 2024 (4.79%). The average rate for general credit loans increased to 6.33%, a rise of 0.36 percentage points, the highest since January 2024 (6.38%).
This is the first time since December 2024 (6.15%) that credit loan rates have reached the 6% range. The interest rate for jeonse (key money deposit) loans also rose to 4.35%, an increase of 0.16 percentage points.
Kim Sung-jun, head of the Bank of Korea's Financial Statistics Team, explained, "The rise in short-term benchmark rates and the increase in the proportion of variable-rate loans, which tend to have lower rates, have contributed to the overall increase in mortgage rates as the share of higher-rate general bank mortgages has grown."
The increase in general credit loan rates is attributed to the rise in short-term bank bond rates and the growing share of loans to mid- and low-credit borrowers.
The proportion of fixed-rate mortgages has expanded to 35.3%, an increase of 3.4 percentage points from the previous month, marking the first rise in ten months since November of last year. The share of fixed-rate loans among all household loans also rose to 23.5%, up 2.5 percentage points, the first increase in 13 months.
The fixed-rate mortgage interest rate increased to 4.88%, up 0.12 percentage points, while the variable-rate mortgage rate rose to 4.53%, an increase of 0.18 percentage points. Kim noted, "Historically, when the gap between fixed and variable rates narrows, the share of fixed-rate loans tends to increase. This month, the variable rates have risen relatively more, contributing to the narrowing of the gap."
In August, the corporate loan interest rate rose to 4.30%, an increase of 0.10 percentage points from the previous month. The interest rate for large corporate loans was 4.21%, up 0.03 percentage points, while the rate for small and medium-sized enterprises rose to 4.38%, an increase of 0.16 percentage points. The rise in small and medium-sized enterprise loans reflects a base effect from lower rates in the previous month due to some banks' low-interest policy loans.
The interest rate for savings deposits remained stable at 3.21%. The rate for pure savings deposits, such as time deposits, decreased by 0.02 percentage points to 3.14%, while the rate for market-based financial products, such as financial bonds and certificates of deposit (CDs), rose by 0.05 percentage points to 3.53%.
The interest rate spread between new loans and deposits at banks widened to 1.19 percentage points, an increase of 0.13 percentage points from the previous month, marking the first rise in seven months. The balance-based interest rate spread decreased to 2.20 percentage points, down 0.02 percentage points.
Regarding future interest rate trends, Kim stated, "In September, market interest rates have generally risen by about 20 basis points (1 basis point = 0.01 percentage points) across the board. If this trend continues until the end of the month, there is a high likelihood that loan rates will also rise in line with market rates. However, the extent of the increase will depend on banks' lending strategies, so we will need to confirm actual data to know for sure."
* This article has been translated by AI.
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