Mortgage rates for housing loans fell last month for the first time in seven months. The share of fixed-rate loans dropped below half, reaching its lowest level in four years and nine months.
According to the Bank of Korea's "Weighted Average Interest Rate" statistics released on May 29, the weighted average mortgage rate for new loans at deposit banks was 4.31% in April, a decrease of 0.03 percentage points from the previous month. This marks the first decline since October of last year.
While fixed-rate mortgage rates increased due to the rise in the government-backed housing loan rates, the overall drop in mortgage rates was influenced by a higher proportion of lower-rate variable loans.
The overall household loan rate also fell from 4.51% in March to 4.43% in April, a decrease of 0.08 percentage points. This decline was driven by a 0.11 percentage point drop in mortgage and guarantee loan rates, along with a reduction in the share of higher-rate general credit loans.
Among mortgages, the share of fixed-rate loans decreased by 13.0 percentage points to 47.8% in just one month. This marks the lowest level since July 2021 (43.9%) and follows six consecutive months of decline since November 2025 (90.2%). The fixed-rate mortgage rate was 4.34%, higher than the variable rate of 4.28%, which likely contributed to this trend.
The share of fixed-rate loans among all household loans also fell from 35.5% to 27.8%, the lowest level since July 2022 (21.4%).
Lee Hye-young, head of the Bank of Korea's Financial Statistics Team, explained, "The reduction in the fixed-rate share is due to the fact that the fixed-rate level is significantly higher than variable rates, particularly as the government-backed housing loan rates have increased. Borrowers are opting for lower rates."
The government-backed housing loan rates were frozen between 3.65% and 3.95% from February to December last year, but have seen three increases this year: 0.25 percentage points in January, 0.15 percentage points in February, and 0.30 percentage points in April, influenced by the ongoing rise in mortgage-backed securities (MBS) issuance rates.
In April, corporate loan rates remained unchanged at 4.14%. While rates for large enterprises decreased by 0.02 percentage points, the rates for small and medium-sized enterprises increased by 0.01 percentage points due to some banks engaging in high-interest financing.
Overall bank loan rates, which include both household and corporate loans, remained stable at 4.20%, as the decline in household loans was offset by stable corporate loan rates.
The monthly savings deposit rate (based on new transactions) rose from 2.82% to 2.92%. The rates for pure savings deposits, such as time deposits (2.87%), and market-based financial products like financial bonds and certificates of deposit (CDs) increased by 0.08 and 0.09 percentage points, respectively.
The interest rate spread between loans and deposits, calculated based on new transactions, decreased by 0.10 percentage points to 1.28%, marking three consecutive months of decline. However, the balance-based interest rate spread increased by 0.01 percentage points to 2.28%.
As benchmark rates have risen this month, it is expected that loan rates will also increase. However, the Bank of Korea noted that loan rates vary by product, making it difficult to predict exact changes. Lee stated, "This month, both short-term and long-term rates have risen, with long-term rates increasing significantly. Different products are influenced by varying benchmark rates, and the proportion of products offered by banks also affects this, so predictions are challenging."
* This article has been translated by AI.
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