Last month, the average interest rate on household loans by banks reached 4%, the highest in 7 years and 10 months. Mortgage loan interest rates fell slightly due to the increase in preferential rates by banks, but the increase was largely due to a 0.13 percentage point increase in the interest rate on credit loans.
According to statistics on the ‘weighted average interest rate of financial institutions’ released by the Bank of Korea on the 29th, the interest rate on household loans (weighted average, based on new handling amount) of deposit banks in March rose by 0.05 percentage point to 3.98% per annum. This is the highest level in 7 years and 10 months since May 2014 (4.02%).
Among household loans, the interest rate on mortgages fell by 0.04 percentage points from 3.88% to 3.84%. However, the interest rate on general credit loans rose 0.13 percentage points from 5.33% to 5.46%, raising the average interest rate on household loans. The increase in the proportion of high-interest loans to low-credit borrowers also had an impact.
Song Jae-chang, head of the financial statistics team at the BOK’s Economic Statistics Bureau, said, “The interest rates on mortgage loans and guarantee loans fell due to the increase in preferential rates. As it rose, the overall household loan interest rate also rose by 0.05 percentage points,” he explained.
The corporate loan interest rate (3.39% per annum) was 0.02 percentage points higher than in February (3.37%). The interest rate on loans to large corporations remained unchanged from 3.12%, and the interest rate for loans to SMEs (3.59 → 3.57%) fell by 0.02 percentage points.
The average of all loan interest rates (weighted average, based on new handling amount) of deposit banks, which reflects both corporate and household loan rates, was 3.50%, 0.01 percentage points lower than in February (3.51%). Although interest rates on both corporate and household loans have risen, corporate loans with low interest rates have increased their share of total bank loans.
The average interest rate for savings-type deposits at deposit banks also rose by 0.04 percentage points from 1.70% per annum to 1.74%.
The deposit-to-deposit margin (the difference between the loan interest rate and the savings-type receipt rate) based on the new amount of deposits handled by deposit banks was 1.76 percentage points, down 0.05 percentage points from February (1.81%).
Based on the balance, not the new standard, the total receiving rate (0.96%) rose by 0.03 percentage points, and the total loan interest rate (3.28%) also rose by 0.08 percentage points.
As a result, the loan-to-deposit margin (2.32 percentage points) increased by 0.05 percentage points. It is the largest in three years since March 2019 (2.32 percentage points).
Team leader Song said, “The difference in interest rates based on new transactions has decreased due to the expansion of preferential rates by banks, but the difference in interest rates between loans and loans has grown. We will have to watch our back a little more.”
Reporter Song Su-yeon