Last month, mortgage rates increased for the second consecutive month due to rising benchmark rates. As borrowers continue to prefer variable rates, the share of fixed-rate loans has decreased.
According to the Bank of Korea's 'Weighted Average Interest Rates' report released on July 28, the weighted average mortgage rate for June was 4.36%, up 0.04 percentage points from the previous month. This marks the second consecutive month of increases following May.
The rise in mortgage rates is attributed to increases in benchmark rates and the government-backed mortgage rate, which has risen for nine consecutive months, leading to a greater share of relatively lower-rate variable loans.
The average interest rate for general credit loans also rose to 5.72%, an increase of 0.23 percentage points from the previous month. This was influenced by the rise in long-term bank bond rates and an increase in loans to mid- to low-credit borrowers by some banks.
With both mortgage and credit loan rates rising, the overall household loan rate increased from 4.46% in May to 4.50% in June, a rise of 0.04 percentage points.
The share of fixed-rate loans among all household loans fell from 24.6% to 22.7%. Similarly, the share of fixed-rate mortgages decreased from 41.6% to 37.7% during the same period.
Lee Hye-young, head of the Bank of Korea's Financial Statistics Team, stated, "The increase in the share of variable rates is due to borrowers opting for them because they are relatively lower than fixed rates. Fixed rates include government-backed loans, so excluding those, the actual fixed rate level is likely higher."
She added, "While the share of fixed rates based on new loans continues to decline, the decrease in terms of outstanding loans is not as significant. However, the ongoing decline in new loan shares should be monitored closely."
Corporate loan rates also rose, with the corporate loan rate for June at 4.27%, up 0.14 percentage points from the previous month. Large corporate loan rates increased by 0.07 percentage points to 4.17%, while small and medium-sized enterprise loan rates rose by 0.23 percentage points to 4.38%.
The overall bank loan rate, including household and corporate loans, rose to 4.31%, an increase of 0.12 percentage points from the previous month.
Interest rates on savings deposits also rose, reaching 3.08%, up 0.15 percentage points due to increases in pure savings deposits and market-based financial products.
As the increase in deposit rates outpaced the rise in loan rates, the interest rate spread based on new loans narrowed to 1.23 percentage points, down 0.03 percentage points from the previous month. The spread based on outstanding loans also decreased to 2.27 percentage points, down 0.01 percentage points.
* This article has been translated by AI.
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