Household loan rates break 4 percent for first time in 8 years

Loan interest rates advertised at a bank branch in Seoul on May 29. [YONHAP]

Average rates on loans to households are above 4 percent for the first time in eight years.

With more base rate increases imminent by the Bank of Korea, the price of money for individuals is likely to continue rising.

According to the Bank of Korea on Tuesday, the average interest rates on fresh household loans from commercial banks in April was 4.05 percent. That's 0.07 percentage points higher than in March.

This is the first time that the average rate at commercial banks has exceeded 4 percent since May 2014.

Mortgage rates were 3.9 percent, up 0.06 percentage points, in March. That's the highest since March 2013, when the mortgages were 3.97 percent.

Rates on unsecured loans averaged 5.62 percent, up 0.16 percentage points, the highest since 5.62 percent in June 2014.

The central bank has been aggressively tightening monetary policy in hopes of lowering inflation.

It has raised the key interest rate three times this year alone, and for the first time in 15 years rates have been increased at two consecutive meetings.

The base rate is now 1.75 percent, the highest since November 2018. Analysts forecast that it will be 2.5 percent by the end of the year. Mortgages could hit 7 percent.

In April, 80.8 percent of new loans were adjustable, up 0.3 percent on month.
By balance, adjustable-rate loans were 77.3 percent of the total in April, 0.3 percentage points more than the previous month. It is the highest ratio since March 2014.

As of March, household loans totaled 1,245.5 trillion won, up 4.7 percent on year.

BY LEE HO-JEONG, AHN HYO-SEONG [lee.hojeong@joongang.co.kr]