Rates on loans on upward trajectory
![A customer consults at a bank in Seoul Thursday. [NEWS1]](https://koreajoongangdaily.joins.com/data/photo/2022/04/03/041ed51b-3728-42b9-8c33-5c7a86c0c20d.jpg)
A customer consults at a bank in Seoul Thursday. [NEWS1]
It's getting more expensive to borrow in Korea.
The average interest rate for household lending -- mortgages and other kinds of loans from banks -- neared 4 percent last month, the highest level since July 2014. On mortgages, some banks are charging over 6 percent.
The weighted average interest rate for household lending in February was 3.93 percent, up 0.02 percentage points from the previous month, according to the Bank of Korea on Thursday. Interest rates on unsecured loans rose 0.05 percentage points on month to 5.33 percent, the highest level since 5.38 percent in August 2014. Interest rates on mortgages were 3.88 percent, up 0.03 percentage points from the previous month. That was the highest level since 3.97 percent in March 2013.
Fixed interest rates for mortgages at commercial banks – KB Kookmin, Shinhan, Hana, Woori, NongHyup – ranged between 4 to 6.1 percent annually as of late March. The rate is fixed for five years. The last time the rate for a mortgage surpassed 6 percent was in November 2011.
Fixed rate loans are usually more popular when interest rates are rising, and the rate is usually higher than for variable rate mortgages. But that high rate seems to have turned off borrowers. Fixed rate loans accounted for 22 percent of mortgages signed in February, lower than 31.1 percent last February.
Rates on loans for jeonse, long-term rental deposits on residences, also jumped.
Rates for jeonse loans at commercial banks range between 3 and 5 percent. A jeonse loan from Hana Bank offers a 5.071 percent rate.
More expensive loans usually mean a higher spread between lending rates and money paid on deposits. But they can also dampen the demand for loans.
Total household debt outstanding at the five commercial banks was 705.29 trillion won ($580 billion) as of March 24, down 0.09 percent on month. In February, outstanding household debt fell 0.2 percent on-month.
Rates on loans will rise with Bank of Korea (BOK) base rate rises.
The BOK raised the benchmark rate by 0.25 percentage points to 1.25 percent in January. Its monetary policy board froze the rate in February. The trend under new BOK Governor Rhee Chang-yong remains vague.
“Large rate differences [with the U.S.] are not desirable," Rhee told reporters on his way to an office in the central bank where he is preparing for his confirmation hearing.
But since the United States has high growth and inflation, the speed of upping the rate in the United States could be faster than in Korea, Rhee said.
A customer consults at a bank in Seoul Thursday. [NEWS1]
It's getting more expensive to borrow in Korea.
The average interest rate for household lending -- mortgages and other kinds of loans from banks -- neared 4 percent last month, the highest level since July 2014. On mortgages, some banks are charging over 6 percent.
The weighted average interest rate for household lending in February was 3.93 percent, up 0.02 percentage points from the previous month, according to the Bank of Korea on Thursday. Interest rates on unsecured loans rose 0.05 percentage points on month to 5.33 percent, the highest level since 5.38 percent in August 2014. Interest rates on mortgages were 3.88 percent, up 0.03 percentage points from the previous month. That was the highest level since 3.97 percent in March 2013.
Fixed interest rates for mortgages at commercial banks – KB Kookmin, Shinhan, Hana, Woori, NongHyup – ranged between 4 to 6.1 percent annually as of late March. The rate is fixed for five years. The last time the rate for a mortgage surpassed 6 percent was in November 2011.
Fixed rate loans are usually more popular when interest rates are rising, and the rate is usually higher than for variable rate mortgages. But that high rate seems to have turned off borrowers. Fixed rate loans accounted for 22 percent of mortgages signed in February, lower than 31.1 percent last February.
Rates on loans for jeonse, long-term rental deposits on residences, also jumped.
Rates for jeonse loans at commercial banks range between 3 and 5 percent. A jeonse loan from Hana Bank offers a 5.071 percent rate.
More expensive loans usually mean a higher spread between lending rates and money paid on deposits. But they can also dampen the demand for loans.
Total household debt outstanding at the five commercial banks was 705.29 trillion won ($580 billion) as of March 24, down 0.09 percent on month. In February, outstanding household debt fell 0.2 percent on-month.
Rates on loans will rise with Bank of Korea (BOK) base rate rises.
The BOK raised the benchmark rate by 0.25 percentage points to 1.25 percent in January. Its monetary policy board froze the rate in February. The trend under new BOK Governor Rhee Chang-yong remains vague.
“Large rate differences [with the U.S.] are not desirable," Rhee told reporters on his way to an office in the central bank where he is preparing for his confirmation hearing.
But since the United States has high growth and inflation, the speed of upping the rate in the United States could be faster than in Korea, Rhee said.
BY JIN MIN-JI, AHN HYO-SUNG [jin.minji@joongang.co.kr]
with the Korea JoongAng Daily
To write comments, please log in to one of the accounts.
Standards Board Policy (0/250자)